Currency Market Update 14/07/10

Sterling rallied yesterday after the release of U.K. CPI data. CPI y/y came out at 3.2% in June, in line with expectations and only slightly lower than the 3.4% in May. The figures show inflation to still be well above the Bank of England’s 2% target and has led to speculation that the central bank would be forced to take a more hawkish stance on interest rates going forward.
In addition to the downgrade of Portugal by Moody’s rating agency the release of weaker German ZEW economic sentiment figures pulled the Euro lower across the board. The ZEW index dropped to 21.2 in June, down from May’s 28.7 figure.
U.S. data gave some relief to the Euro and allowed the pound to extend earlier gains. The U.S. trade balance came out at -$42.3bln, this showed the trade deficit increasing from the previous month and also adds to investor concerns that the U.S. recovery may slow or even fall into a ‘double dip recession’.
The Pound opens higher this morning as equity markets trade in positive territory and Nationwide’s consumer confidence index beat the consensus forecast. Traders await the release of U.K. employment data and European CPI inflation numbers this morning. For the U.S. advance retail sales are to be released this afternoon while the Federal Reserve Bank issues the minutes from its last MPC meeting tonight.

Live IB rates at 10.24 am UK
GBP – EURO 1.2002
GBP - USD 1.525
GBP- AUD 1.726
EURO - USD 1.27
 

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