The pound continued its recent upwards trend against the single currency yesterday after inflation unexpectedly rose in February and Bank of England Governor Mervyn King said the central bank's quantitative easing programme may be reduced if it is successful. Consumer Price Inflation rose to an annual rate of 3.2%, despite many expecting that it would actually fall to 2.6%. As expected the Retail Price Index fell, but not into negative territory yet, with it currently sitting at 0%. Mervyn King stated that CPI’s surprise jump was due to the pound’s weakness making imports more expensive. It was also interesting to note that King warned against further borrowing to stimulate the economy, due to the already dire state of the UK’s finances.
The Confederation of British Industry release their distributive trades survey this morning, whilst IFO release the business climate and expectations survey in Germany.
Wednesday 25 March 2009
Cable pushes higher on supprise UK inflation data
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.
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.
US dollar recovers against euro on poorer sentiment
The US dollar recovered ground against the euro yesterday, recovering almost 2 cents as investors bought back into the safe haven currency as recent risk appetite faded somewhat. North American equity markets finished lower yesterday evening, a day after a big rally that was driven partly by news of the US plan to help rid banks of toxic assets. As optimism about that plan faded yesterday the US dollar rose as its safe-haven appeal increased.
Also, the euro was undermined as traders shifted their focus to a change of tone from European Central Bank members that suggested impending economic measures from the eurozone. Both ECB President Jean-Claude Trichet and governing council member Axel Weber said eurozone rates aren't at their bottom. The European Central Bank has not announced quantitative easing plans as of yet, but some analysts are now predicting that a rate cut at the ECB’s next meeting on 2nd April may be combined with news of quantitative easing.
In Germany, IFO Expectations are due to be released this morning at 09.00 GMT. In the US, there are several significant announcements taking place today including MBA Mortgage Applications, Durable Goods Orders and New Home Sales.
Also, the euro was undermined as traders shifted their focus to a change of tone from European Central Bank members that suggested impending economic measures from the eurozone. Both ECB President Jean-Claude Trichet and governing council member Axel Weber said eurozone rates aren't at their bottom. The European Central Bank has not announced quantitative easing plans as of yet, but some analysts are now predicting that a rate cut at the ECB’s next meeting on 2nd April may be combined with news of quantitative easing.
In Germany, IFO Expectations are due to be released this morning at 09.00 GMT. In the US, there are several significant announcements taking place today including MBA Mortgage Applications, Durable Goods Orders and New Home Sales.
Pound strengthens over Aussie dollar
The Australian dollar fell from its 10 week high against sterling yesterday after UK inflation rose unexpectedly in February. The rise in British consumer price inflation is believed to be temporary due to sterling’s recent weakness. This was coupled with Bank of England Governor Mervyn King’s comments that the central bank’s quantitative easing programme may be reduced if it is successful. Support for sterling was also seen as investors cheered a US plan to soak up toxic assets which have plagued the credit markets, however gains were limited by weaker equities.
Kiwi dollar weakens against pound
The New Zealand dollar fell lower yesterday as a slip in global equities saw risk appetite weaken. The kiwi dollar’s advance was also kept in check ahead of expected weak economic data, with fourth quarter current account and gross domestic product data due later this week. Current account data will be avidly watched this evening after Finance Minister Bill English warned about New Zealand’s ‘challenge of chronic twin deficits’.
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