Rational FX: UK PPI comes in better than expected [14/02/2011]

Rational FX: UK PPI comes in better than expected [14/02/2011]
Currencies
High
Low
Support
Resistance
GBP/EUR
1.1877
1.1790
1.1790
1.1900
GBP/USD
1.6112
1.5961
1.5960
1.6050
EUR/USD
1.3620
1.3461
1.3440
1.3550

Friday’s Market Movers

  • The UK PPI was the main focus for UK data on Friday, coming out considerably better than expected both MoM and YoY. As a measure of inflation in the UK market this could serve to increase confidence that a potential hike in interest rates is imminent, especially with yet another BOE member joining Andrew Sentence and Martin Wheal in calling for this interest rate rise. The Bank of England minutes are due to come out in 2 weeks time, with all eyes on any news regarding interest rates. This failed to have a direct impact on the currency markets however.

  • The German CPI was the only important data from the Euro zone on Friday, yet despite coming out better than expected MoM and YoY, further heightening concerns over a rise in inflation, this caused no noticeable market movement for the Euro against any of its major counterparts.

  • Trichet spoke late on Friday afternoon. He did address the issue of inflation in the Euro zone but maintained that focus should still be on governance reform. This had little effect on the markets directly.

  • On Friday morning we saw risk aversion cause the USD to strengthen, with cable dipping below the recent resistance level of 1.61, off the back of morning news suggesting that Mubarak would not step down in Egypt and allow the military to take control. Despite news later in the day that Mubarak had actually stepped down now this did not cause any sort of reverse effect from the mornings initial speculations.

  • The actual US data releases had little effect on the greenback, possibly due to a poor trade balance figure being cancelled out by a higher than expected Reuters/Michigan Consumer Sentiment Index Figure.

Today’s Market Movers

  • With no key data released in the UK today, across the pond there is still growing concerns regarding inflation in the Euro Zone with Industrial Production figures expected to come in higher YoY, despite an expected dip MoM. High inflation could indicate a potential for a quicker interest rate rise, which may see the Euro strengthen.

  • There is no data to be released in the US today, so any major movements are likely to be brought about following the next steps take in the Egyptian economy with Mubarak stepping down on Friday

We wish you a very nice day.

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