After the dramatic start to yesterday’s trading session after the New Zealand earthquake reports, the markets were calmer through the rest of the day. Te reports from Christchurch have been understandably mixed but it seems tragically inevitable that the death toll will rise and the cost of the rebuild will escalate. The scenes of devastation are chilling. After an initial sell off in the value of the NZ Dollar, the decline stopped and the rest of the day saw the Sterling - NZ Dollar exchange rate trade around NZ$ 2.13 to NZ$ 2.16.

The data diary was pretty light elsewhere. UK public sector borrowing declined in January as yearend tax receipts boosted the government’s bank account. This is an annual event so no one was overly surprised. What was surprising though was the support offered by the governor of the Bank of England to the chancellor over his cost cutting measures. It lead inevitably to questions about Mervyn King’s independence. It was quite a bold move for him as he is already under pressure for not doing a good enough job in controlling inflation. He may want to keep his head below the parapet but he won’t have a chance to do that today. The minutes from the last Bank of England interest rate setting meeting will be released today at 9:30 am (UK time) so there will be loads of questions; especially if more than one member of the Monetary Policy Committee voted for an interest rate hike and that is very likely. If it’s true, we can expect further Sterling strength in the short term but I would urge caution. Were the BOE to hike interest rates, the obvious question would be “well you have been pretty sanguine about high inflation up until now; why raise rates when the economic recovery is so very fragile and you believe inflation will fall of its own accord?” Answer on a postcard to..........

Other than the UK news, yesterday also brought a rise in US consumer confidence. The Conference Board's index of consumer confidence rose to 70.4 in February. That is up from 64.8 in January and well above expectations. The US Dollar didn’t strengthen significantly on the news but it does add to an increasing number of positive data releases in the US of late. It is likely this afternoon’s US housing data will also be upbeat so US Dollar strength may ensue. That is already happening to some degree as investors run for cover while the Middle East simmers and after a bizarre speech from Colonel Qaddafi. German Chancellor Angela Merkel described him as ‘scary’; it’s hard to disagree but scary in a ‘bloke ranting loudly on the bus’ kind of way rather than menacing. The only problem is that he has a group of highly armed and probably British trained mercenaries at his disposal so he could cause all manner of mayhem and bloodshed. Thankfully, it would appear that the army and police forces are largely on the side of the general public so we will see what happens. I can’t think it is going to be a nice handover of power though. Good luck to the people of Libya.

The Euro had a bit of a purple patch yesterday as an European Central Bank member Yves Mersch said he wouldn’t be surprised if the ECB sharpened it language on interest rate hikes. It’s a bit on a ‘non-statement’ really. His expectation of the potential for tougher talk is not in itself a game changer but rumour is the key in unsettled markets. The other rumour is that further funds will be pumped into Greece to keep the wolves from the door. There are still fundamental flaws in the structure of the Eurozone but it seems the ‘sticking plaster’ approach is keeping the Euro from significant decline at the moment. Will that last? Goodness only knows but I can’t help thinking the Euro is due its comeuppance some time soon.

In other news, Japan has posted its first trade deficit in nearly 2 years as falling overseas demand; especially in China, slashed exports. That’ll add weight to the reduction in confidence in the Yen after Moody’s downgraded the debt ratings outlook for Japan.

Commodities have been boosted by nervousness over the Libyan and Bahraini protests and that has added weight to the Australian Dollar and the Canadian Dollar to some degree but we are still within recent ranges overall.

Today’s data diary is empty other than those items mentioned above so long periods of boredom followed by short bouts of high energy is probably the order of the day. I know what you’re thinking; “Not again”.


Egyptian calming measures

The Army in Egypt has asked the city's taxi drivers to drive around Cairo like lunatics, sounding their car horns. It is hoped that the familiar sounds of the city will induce a return to tranquillity and normality.

Operation Toot'n Calm'Em will last for the rest of the week.