In Tuesday’s trading the pound strengthened over the US dollar by 2.06 cents to close the day at the 1.4680 level. During the session the pound set a six-week high of 1.4778 after it was buoyed by higher than expected inflation data. The Retail Price Index (RPI) measured inflation at 0.0% in the year to February, the first time in 49 years that inflation has fallen this low and came as a result of a 0.9% fall on the month. The Consumer Price Index (CPI), a measure of inflation which excludes mortgages, currently stands at 3.2% on the year, whilst Core CPI, which excludes the prices for volatile items such as food and energy, was measured at 1.6%. These results were higher than expected, with many investors expecting the RPI to fall below 0.0%. This news, as well as improved risk appetite from the announcement of the Public-Private Investment Programme on Monday in the US, saw demand for the pound remain firm. Comments from the BoE Governor Mervyn King also helped the pound as he suggested that the UK’s quantitative easing programme could not be expanded.
In today’s trading investor sentiment has shifted toward a more risk averse stance and as such the dollar has strengthened back over the pound as its safe haven demand has increased. Later today MBA Mortgage Applications, Durable Goods Orders, New Home Sales and EIA Crude Oil Stocks Change data is announced in the US. Meanwhile the Confederation of British Industry release their distributive trades survey in the UK this morning.
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