Poor US data drives sterling upwards against greenback

Tom Tong16/Aug/2011Currency Updates

GBP

Yesterday we saw the sterling gain against a weak dollar due to the weak TIC data released from the US. Today sees CPI (and RPI) out this morning 09.30. It is forecast at 4.5%, which is still 2.5% over the BoE target rate.

The Bank of England’s inflation letter is also out this morning at 09.30 – if CPI figures are over 3% or under 1%.

Concerns over UK recovery and chance of monetary easing should keep the GBP in check. Even if there is a surprise jump in CPI, the market will be instantly dubious of its impact as the Bank of England has maintained a dovish bearing, further to comments from the BoE’s David Miles.

EUR

All eyes were on Germany as stock futures fell after poor data showed that the heartbeat of the Eurozone’s economy hardly grew in the second quarter, building on continuing euro debt and uncertainties over the future of the Eurozone.

The economy saw growth of 0.1% over the quarter, with this figure being linked to Germany propping up the sovereign debt and growing concerns regarding consumer confidence as the majority of the German public want Greece out of the single currency. This data came out ahead of a key meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy, where the two are looking to discuss the solution the Eurozone debt crisis. The main focus is to solve the spiralling debt of both Spain and Italy and secure the future of Germany, France and most importantly, the future of Europe.

USD

The dollar saw a big move late in the day yesterday as a batch of weak economic data came out of the US, primarily TIC data, which shows in and out flows of financial resources in the United States. The TIC flows is one of the major events in the market, as it is seen by most participants as the government resource for offsetting the current trade deficit. Expectations were for this figure to post $30.4bn where in actual fact the released figure was just $3.7bn.

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Written by Tom Tong

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