The Euro strengthens as markets price in an interest rate rise from the ECB

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The situation in the FX markets seems eerily calm given the wild swings seen in the equity markets with the Japanese Yen still refusing to budge. The unfolding situation at a number of Japanese nuclear facilities and the disruption to number of large multi-national companies through blackouts and port disruption could mean this costs the Japanese economy far more than the Kobe earthquake in 1995.

The Japanese authorities continue to instigate measures to attempt to steady financial markets, but the reality is that Japan needs everything working in its favour to right the economy as quickly as possible, and this includes a more competitive exchange rate.

Yesterday's, Eurozone industrial production figure was the only piece of data and rose 0.3% in January as expected, while the December figure was revised up to +0.3% from -0.1% originally.

Sterling declined for the third straight day against the Euro yesterday, as the markets continue to scale back expectations that the Bank of England will raise interest rates. The Euro benefited from a deal announced by European Union finance ministers that will effectively bring a halt to the sovereign debt crisis.

With Europe poised to raise interest rates in April, some peripheral economies are still struggling with recession, but news of the revamped bailout plan will be a source of encouragement to investors.

The US Federal Reserve's meeting tonight may well prove to be another missed opportunity if they fail to signal an early end to the "QE2" programme. The Beige Book report seemed to confirm that the Federal Reserve are not ready to move their monetary stance to the next phase just yet.