Good Morning. The pound has risen against the Euro and US Dollar after better than expected CPI. We'll take a detailed look at this in a moment. First, rates @ 08:30am are as follows:
- GBP/EUR 1.1450
- GBP/USD 1.5375
- GBP/AUD 1.6491
- GBP/NZD 2.1586
- GBP/CAD 1.5283
- GBP/ZAR 11.300
- GBP/JPY 143.35
- GBP/CHF 1.6417
- EUR/USD 1.3424
Consumer Price Index is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. CPI is a key indicator to measure inflation and changes in purchasing trends.
As the figure was much higher than expected, this shows inflation is rising. So why did this boost the pound? Well, higher inflation generally leads to higher interest rates to control it. Higher interest rates mean a better return for investors. This then drives investment towards Sterling strengthening the currency. The net result has been a rise in exchange rates.
UK rates are at a record low 0.5 percent and the BoE has only recently paused its programme to stimulate the weak economy by buying domestic assets from the market, but analysts said rising price risks increased speculation of a rate rise in the fourth quarter. It is this that's caused strength.
Inflation data from the EU along with UK Retail Sales will likely cause some volatility in the GBP/EUR cross. Later in the day the focus is on the USA when we see producer prices and housing market data.
Good US figures could cause the USD to strengthen – it’s important to note that GBP/USD is near a 2 month high – good figures may reverse this recent trend so the current buying opportunities may be limited. Contact us today to discuss if you need to buy or sell US Dollars.
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