13th April 2011
Good morning. A surprise fall in inflation yesterday means there is little chance of a UK interest rate hike any time soon. The figures pushed Sterling to a 6 month low vs the Euro, and very close to the lowest in a year. At 08:30am this morning rates are as follows:
Inflation figures push Sterling to near 1 year low vs Euro
- GBP/EUR 1.1218
- GBP/USD 1.6274
- GBP/AUD 1.5500
- GBP/NZD 2.0594
- GBP/CAD 1.5633
- GBP/CHF 1.4601
- GBP/ZAR 10.923
- GBP/JPY 136.75
- GBP/HUF 298.64
- GBP/NOK 8.8457
- EUR/USD 1.4505
The Consumer Price Index (CPI) figures released yesterday showed a fall in inflation for the first time in 8 months. The fall in food and soft drink prices was the main cause. Lower inflation means that initial expectations of a rate hike in the UK have now been pushed back to November.
The news weakened Sterling and after the figures were released at 09:30am the Pound immediately fell and now sits at close to a 1 year low vs the Euro.
A survey also showed the biggest drop in retail sales in nearly 6 years, highlighting the problems facing the UK as the government's tough austerity measures hit consumer spending, and jobs data on Wednesday will also be closely watched.
"The economic data that we've had out of the UK this morning gave a lot of ammunition to sterling bears," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.
"Lower-than-expected inflation, weaker growth, that's taking off pressure from the BoE to raise interest rates and sterling is a loser in that environment.
Sterling fell 1.5 cents against the US Dollar and fell 1 cent vs the Euro. You can read a good report on the inflation figures and what this means for interest rates here on the BBC website.
UK data today comprises of Unemployment data. This will be closely watched and could affect rates further. We expect the Claimant count to be 4.5% and the unemployment rate to be 8%. If the figures are worse than this, expect Sterling to fall further. If the numbers aren't that high however, Sterling should recover.
Eurozone data is in the shape of Industrial Production. The rest of the days releases are US based; Retail Sales, mortgage approvals and Retail Sales
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Labels: GBP/EUR, Interest Rates, UK Inflation