By: Mike Paterson

Main feature was always going to be the BOE Inflation Report and so it proved... CPI seen above its 2% target for a while yet CPI risks broadly balanced at the end of December GDP seen at 1.9% yy in 2 years time MPC will maintain accommodative stance despite CPI above target Supply reforms needed and stimulus for overseas buyers for UK exports With the last two comments came a slam dunk of the Pound and support levels trashed all the way down to key area around 1.5540.. Seen some bounce since then but sellers on the rally understandably. EURGBP got bought by UK clearer for €4+ billion for reported M&A needs. EURUSD has seen large sell interest at 1.3500 just taken out to test next resistance around 1.3520 USDYEN had an early run down below 93.00 but found good buying in the dips and was soon travelling north again along with EURJPY. Talk of fund selling around 93.75 has put a cap on it for the moment. Russian Dep Fin Min comments that Yen has definitely been overvalued adding to Yen weakness prior. Other news: EU/US free-trade talks to commence by June Sweden leaves repo rate unchanged at 1% and sees no change this year SNB to closely monitor over-heated housing market and will reassess/deactivate CCB as necessary.. Kind of put a base under USDCHF and EURCHF as it would help dampen CHF demand