Inflation, retail and house price growth… can this week match up?

This will be an important week for Sterling with the Bank of England minutes coming out on Wednesday and the reviewed fourth quarter GDP figures on Friday. Both of these events will be crucial in helping markets determine when an interest rate rise might come. Should the minutes suggest that more Bank of England members joined Andrew Sentence and Martin Weale by voting in favour of a rate hike and if GDP figures are revised upwards, we could see some Sterling strength as the hype over an interest rate rise is fuelled. It’s a good idea to speak with your broker this week for any transfers involving Sterling to discuss how these events may affect the rates.

Pound Sterling – UK Markets

Sterling reached two week highs on Friday against the US Dollar following last week’s high inflation and retails sales figures. However, the Pound has taken a sharp drop against the Euro early this morning despite a Rightmove report revealing that house prices grew again in the month of February. According to the Rightmove survey average asking prices in England and Wales were up by 3.1 percent to £230, 030. The news comes after last week’s over target inflation figures and strong retail sales figures on Friday. The retail sales figures for January have eased concerns stemming from December’s poor figures which were negatively affected by the severe weather. January’s figures were up 1.9 percent on the previous month. The annual increase stood at 5.3 percent which was the largest increase for more than six years. The rising monthly retail figure has raised expectations that GDP will show positive growth for the first quarter of 2011. This Wednesday sees the minutes from the last Bank of England policy meeting which will help markets interpret when interest rates might rise depending on how the last round of voting was split.

US Dollar – US Markets

The US Dollar has experienced volatile movement over the weekend against the Euro and Sterling, and is now trading lower than last week’s position despite the fact that unrest in the Middle East has boosted demand for safe haven currencies. The feud between China and the US over China’s perceived manipulation of exchange rates has overshadowed G20 talks this weekend. The US had hoped to include currency reserves amongst the indicators which would be used to monitor the economies of member countries but China stood fast. China is fast catching the US as the biggest global economy. US data is released this afternoon in the areas of home prices, consumer confidence and the manufacturing index.

Euro – European Markets

The Euro continued with Friday’s advances on the US Dollar as the question of when the European Central Bank might raise interest rates comes back into the spotlight as it was reported that a senior official commented that policies will be changed to deal with growing price pressures. Some positive data came from Europe and Germany this morning, In particular, both European Services and Manufacturing data came in higher than forecast setting European data off on the right foot this week.

Other Currencies – Highlights

Thailand’s economy has emerged from recession according to the latest GDP figures indicating growth of 1.2 percent for the last quarter of 2010. This follows a contraction of 0.6 percent in the second quarter and 0.3 percent in the third quarter. The rebound was boosted by a pick up in exports and may pave the way for an interest rate rise. Having gained on the Thai Baht throughout last week, Sterling has dropped against the currency so far this morning. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.