Inflation Down But Sterling Hot On Its Heels

Sterling has tumbled yet lower this morning after a tidal wave of poor data rocked the already weak currency. Retail sales fell at their fastest pace for six months, the house price index was poor and finally inflation, the main issue pressurising the Bank of England to raise rates, was still high but had dropped from 4.4 percent to 4 percent. The indication that inflationary pressure could be dropping is what the markets are concentrating on, believing that this will make an interest rate rise less likely and later to occur. If you are exchanging another currency into Sterling, it is a good time to speak with your broker for a quote and the transfer options available. Alternatively register an enquiry with us online.

Pound Sterling – UK Markets

It has been a disappointing morning for the Pound with dire retail sales and poor housing data setting the tone for a below forecast inflation figure that has pushed the Pound further down. Sterling was already at a five and a half month low this morning before dropping another 0.5 percent against the Euro as the slightly lower inflation figure suggested that the Bank of England may be relieved of some pressure to raise interest rates. The retail figures fell at the fastest pace in six years confirming the weakness in this sector of the economy following poor figures last time round. The house price index was also almost half below forecast adding to the Pound’s woes. Whereas inflation was expected to stay in line with the 4.4 percent figure revealed last month, it actually came in lower at 4 percent. This is still well above the Bank of England’s target rate but suggests that inflationary pressure might be easing and therefore is unlikely to encourage the Bank of England to raise interest rates.

US Dollar – US Markets

The Dollar gained marginally on Sterling overnight as markets awaited the heavy set of data in the UK. It did also manage to gain on the Euro following a slump to a fourteen month low after recovering from the threat of a Government shut down on spending cuts. As one of the safe-haven currencies, turned to in times of uncertainty, the Dollar has also found some strength following further earthquakes in Japan.

Euro – European Markets

Economic sentiment from both Europe and Germany this morning came in below forecasts revealing that despite the interest rate rise in Europe, investor confidence is low, which is not surprising given the array of sovereign debt issues that continue to rumble on. This has been overshadowed however by the poor UK data this morning, with the Euro managing a steep ascent on the Pound. It has also started to re-climb on the Dollar so far this morning following yesterday’s falls. Industrial production data is due this afternoon.

Other Currencies – Highlights

The currencies known as the ‘safe haven’ currencies, namely the Yen, Dollar and Swiss Franc have all strengthened following another spate of earthquakes in Tokyo. The raising of the severity rating for the nuclear crisis has also added to the uncertainty. The drops in Asian stocks has also had an impact on the Australian Dollar which has seen falls.