UK inflation figures remain high; EU ministers discuss Greece

Tom Tong15/Jun/2011Currency Updates

GBP

The British pound struggled through most of yesterday’s trade as the currency took direction from stronger counterparts. With a CPI rating of 4.5%, market expectations that this is to reach 5% and all rate hike expectations left on hold it is not surprising to see little drive found for the sterling. Employment data released today and retail sales figures out tomorrow will be keenly watched and could quite possibly move the market.

USD

With the capital markets advancing, CPI data released today that is expected to post a 3.2% year on year figure and no mention of higher rates come the end of QE2, we could see a reversal in the past trend for the USD. Ben Bernanke has also raised fears over the debt ceiling for the current federal debt limit, raising further questions over the future for current US fiscal policy. For the benchmark currency itself, a reversal shown in the Dollar Index was confirmation enough. However, much more information can be drawn for its performance against various counterparts, with gains against its fellow safe haven counterparts, the Swiss franc and Japanese yen, and modest losses against the euro and British pound. Conversely, we have seen the most notable rally for two months in the S&P 500. However, this ultimately stalled at the same resistance point noted on the last two weeks closes.

EUR

EU finance ministers met yesterday to discuss what were believed to be further talks on a second bailout effort for Greece. After a downgrade on Monday of Greece’s sovereign rating to CCC, one more downgrade would see the country officially default. As expected, an unfortunate end appeared showing no resolution made as they failed to make any meaningful progress on the Eurozone’s most troubled member. With such trouble looming and no resolve in current predictions we could see a situation where Germany, Holland and the EU cannot find common ground. This could ultimately prove very troubling for the EU as a whole and weaken the move recently seen in EURUSD. Conversely, ECB’s Makuch said that a rate hike in July was quite likely and we saw the euro rally on the back of this statement.

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Written by Tom Tong

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