Prolonged inflation high could see Sterling stumble
Pound Sterling – UK Markets
A public letter of explanation has been issued by Bank of England Governor Mervyn King as the UK reaches a 17 month inflation high.
Based on the Consumer Prices Index (CPI) measure, inflation hit 3.7% which far exceeds the 2% inflation target and has instigated Mervyn King’s letter of explanation.
The impact of this prolonged inflation high could potentially see the Sterling stumble in the currency markets, if it is not reigned in.
US Dollar – US Markets
More positive data from the US aids to the continued strength of the Dollar.
US homebuyers are taking advantage of the final stages of tax credits leading to a 3.8 percent rise in housing starts.
Contact your broker for further information and the latest rates.
Euro – European Markets
The Euro may continue to drop past its four year low against the Dollar, as the European Central Bank tolerates the currency’s decline as a way to counter deflation, according to Resona Bank Ltd.
The chief strategist of Japan’s fourth largest banking group suggests “a weak Euro is probably desirable for the economy and for the sake of the market’s stability".
The ZEW sentiment figures are out today which will paint a picture of how optimistic German industry is.
Other Currencies – Highlights
Australia sees another increase in interest rates (6 out of the last 7 decisions have seen an increase) as it weighs Europe’s debts crisis against inflation risks.
Market watchers suggest that China is unlikely to allow the Yuan to appreciate against the Dollar as Europe’s debt crisis has pushed the Euro lower.
The Mexican Peso falls for a third consecutive day amidst concerns that European fiscal measures will curb economic growth.