Already this morning we have had the release of eagerly awaited jobless claims and UK unemployment. UK jobless claims came in better than expected at +24,900 against expectations of +28,000, however the ILO unemployment rate nudged up to 7.8% from 7.6% against the expectation of 7.7%- worse than expected. No move in the markets as yet- we have seen a sell off in sterling ahead of today so to a large extent negativity has already been factored in. The market will also be focusing mainly on the Bank of England’s quarterly inflation report and we will wait to hear substantiation of last weeks expansion of QE coupled with growth and inflation forecasts. The tone is expected to be dovish and could lend to further weakness in the pound, however if the Bank close the door on further monetary stimulus we should see a bounce in the pound…. Yesterday we saw further USD gains against the pound and the euro and also in later trading a move into risk aversion mode as the YEN also gained and commodity linked currencies weakened. This was very apparent in GBP/JPY moving from 160 to 156, however on the other hand GBP/AUD moved up from 1.9650 back over 2. Concerns over China and caution ahead of the Federal Reserve meeting tonight changed the tone back to risk aversion. In China loan growth fell to $52 billion from $248 billion a month earlier…China is still spending like a footballers wife in Bond Street and GDP based on output is near 8%. However the fear is that this growth and stimulus is ultimately not sustainable and banks the extra liquidity is not having the desired effect and instead is buoying equities with the Shanghai index up 80% this year; the central bank estimates that 20% of fresh credit has ended up in equity markets The main event for today is the FED decision with no change in rates expected but focus on the strategy going forward- particularly in relation to inflation expectations and a potential exit strategy from QE.