Tuesday, 22 March 2011

Sterling remains low vs Euro; inflation figures today

22nd March 2011
Good morning. The pound remained low against the Euro yesterday, but hit a 2 week high vs the US Dollar. If inflation figures this morning are high as expected, it could support the case for an early rate hike and give Sterling a boost. At 08:30am this morning rates are as follows:
  • GBP/EUR 1.1471
  • GBP/USD 1.6340
  • GBP/AUD 1.6167
  • GBP/NZD 2.2036
  • GBP/CAD 1.5945
  • GBP/CHF 1.4774
  • GBP/ZAR 11.255
  • GBP/JPY 132.45
  • GBP/HUF 309.89
  • GBP/NOK 9.0672
  • EUR/USD 1.4238

Will inflation figures today give Sterling a boost?

Sterling remains very low vs the Euro due to global uncertainty. Against the US Dollar however, rising oil prices due to tensions in North Africa and the Middle East have weakened the USD significantly, and we're at a 2 week high. A little more and we'll hit a new 1 year high.

Today we have inflation figures released at 09:30am. It's expected that the numbers will show inflation is at more than twice the government target. If confirmed, that would increase the chances of an early rate hike, possibly as soon as May.

"Tuesday's CPI data may show an upside surprise to inflation, and this will be positive for the pound," said Raghav Subbarao, currency strategist at Barclays Capital.

He did not see a "large, sustained move" on the back of strong inflation data, however, with the market likely to await minutes from the Bank of England's last rate meeting and the UK Budget on Wednesday before pushing it higher.

So will a rate hike push GBP/EUR rates higher?

Tomorrow we also have the BoE minutes showing how the MPC voted in the last decision to hold interest rates 2 weeks ago. It will be very interesting to see how many members voted to raise rates, and it will give us an indication when rates in the UK are going to go up.

If buying Euros however, you should be aware it's expected that the EU will raise rates as soon as next month, and as they will be a step ahead of the UK, the GBP/EUR rate may actually decline.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what's happening in the currency markets.