Wednesday, 23 March 2011

Inflation, Budget, BoE Minutes, Best Exchange Rates

23rd March 2011
Good morning. Inflation data yesterday was higher than expected, and this pushed the pound higher against the Euro slightly, but to a 14 month high against the US Dollar. We may see slight further gains after the BoE minutes this morning, but the Budget at Mid-day may take the wind out of Sterling sails. At 08:30am this morning rates are as follows:

  • GBP/EUR 1.1529
  • GBP/USD 1.6364
  • GBP/AUD 1.6217
  • GBP/NZD 2.2087
  • GBP/CAD 1.6056
  • GBP/CHF 1.4708
  • GBP/ZAR 11.280
  • GBP/JPY 132.22
  • GBP/HUF 310.49
  • GBP/NOK 9.1147
  • EUR/USD 1.4188
Inflation Data pushes Sterling higher


Yesterday inflation figures were above forecast, and more than double the governments target of 2%. The news increased the chance of an interest rate hike in the UK in the coming months. Against the Euro gains were limited due to the fact the EU are expected to raise rates next month.

Against the US Dollar though we hit a 14 month high. Most analysts think Sterling is overvalued though and so we expect it to drop back away in the coming days.


Boe Minutes at 09:30

This morning we'll see the minutes to the recent BoE decision to hold rates. The minutes contain discussions, differences of view, and crucially how each of the 9 member committee voted. If more than 2 voted for a hike, this may give Sterling a slight push higher when released at 09:30am.


How will the budget affect rates?

Markets await the UK government's 2011 Budget, due to be unveiled today at lunchtime, which will seek to bolster faltering growth without compromising on a tough austerity programme put in place to get public finances in order.

We don't really expect may surprises. Growth forecasts will probably be revised down. Experts expect the forecast for economic growth in 2011 to be downgraded - after figures showed a 0.6% contraction in the last three months of 2010.

But they also believe borrowing figures will not be as high as previously anticipated - up to £10bn lower than the £158bn predicted in last June's emergency Budget. Yesterday UK borrowing was again higher than expected.

Summary

We don't expect anything in the budget that will boost Sterling much, and in fact if the growth forecasts are worse than expected we may see falls in the Pound as many analysts think it's overvalued.

There may be slight gains after the BoE minutes, so if you need to buy Euros or US Dollars and want the best rates, it may be wise to consider moving before the budget and fixing a rate.



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