The pound was sold heavily on news that Bank of England hawk Andrew Sentence who retires in June, will be replaced by Ben Broadbent. Mr. Broadbent is not as hawkish on inflation as Mr. Sentence, that’s impossible without growing wings and gaining an appetite for mice. He is however highly likely to vote for interest rate hikes given some of his recent comments whilst at Goldman Sachs. Broadbent believes official GDP estimates exaggerate the scale of the recession, spare capacity in the economy is less than official estimates, and rising commodity prices are part of a persistent trend rather than temporary shocks that can be looked-through. This makes the 170 pip sell-off in sterling a bit overdone and more a case of traders taking profit on short dollar positions than a sterling negative.

UK data released this morning was mixed. The February British Retail Consortium retail sales monitor showed like-for-like sales fell a very weak -0.4%. The Royal Institute of Chartered Surveyors UK house price index showed the market was stabilising. There is now however a big divide between London, where prices are gaining and the rest of the UK where prices are falling. The increase in stamp duty for houses over £1m has seen a surge in activity before the increase is introduced next month. This is the first time in 7-months that the survey has been positive about London property prices.

Overnight in Australia we had the NAB February Business confidence index which surged to 14 from 4 in January.

Opinions remain spilt in New Zealand over whether the Reserve Bank of NZ will cut interest rates, and if so by how much. The vast majority of analysts expect a rate cut of 0.25%, but a few major banks are predicting a larger cut of 0.5%. The kiwi dollar strengthened overnight after an article in the Herald reported HSBC calling for no change in the Official Cash Rate from 3.00% on due to high inflation which will be exacerbated by the earthquake rebuild. HSBC are alone in this view, but we will have to wait until Thursday to see who is right. In the meantime expect continued choppy volatility to persist.

The Greek government are fuming over the three-notch downgrade of their credit rating by Moody's on Monday. The government have called the move "completely unjustified". Moody's cut the rating to "highly speculative" status which is not much above “junk” status as they feel the Greeks will default on their big fat debt overtime.


Keep an ear out for news on Portugal heading toward the “bail-out” door also.
There is not a great deal in the way of official data releases today, however several European Central Bank officials have already been on the newswires, so it won’t necessarily be uneventful.
The Libyan crisis is causing oil to spike which has pushed the Euro to $1.40+ against the greenback. If tensions escalate in Libya expect the Euro to push toward $1.41-1.43. Rumours Gaddafi is negotiating an exit strategy out of the country should push the Euro back to more realistic levels.


I mentioned last week that a London restaurant was selling breast milk ice cream named Baby Gaga. A report in the New York Post states Lady Gaga is suing the restaurant for trademark infringement. Her lawyers have called the ice cream which is served by waitresses dressed as the singer, as “deliberately provocative and to many people, nausea-inducing”.
Have a good day.


Quote

I had plenty of pimples as a kid. One day I fell asleep in the library. When I woke up, a blind man was reading my face. Rodney Dangerfield