CPI figures surprise to the downside as Sterling sells off ahead of the BOE quarterly inflation report

Tom Tong13/Feb/2013Currency Updates

EUR

Following ECB’s president Mario Draghi’s speech yesterday we saw a slight upward move in the EUR reacting on Draghi’s comments on Spain, “Spain has made enormous progress since November 2011. The bank aid program is showing positive results, and the EURO-zone in general. Euro area countries have almost halved their fiscal deficits from 6.2% of GDP in 2010 to an estimated 3.3% in 2012.” We saw EUR/USD going to the highest level since the slide last Thursday rising 0.3% in the first hour after the speech.
Today the monthly Industrial Production from the EURO-zone is expected to go into positive numbers following the negative figures from last month. A variation from the expected will produce volatility in the markets.

GBP

Yesterday we had the core inflation figures being released. Both core CPI on a yearly basis and CPI on a monthly basis went into red resulting in sterling dropping against EUR, AUD and CAD among others. On both numbers we had a 0.1% depreciation compared to the previous figures. On a positive note the PPI figures were all showing positive progress, and in turn helped to keep up at least some of the positive spirit on sterling.
Today the BOE releases the quarterly inflation report providing valuable insight into the bank’s view of economic conditions and inflation – the key factors that will shape the future of monetary policy and influence their interest rate decisions. This release together with governor Mervyn King’s speech on the monetary policy of BOE will provide massive movement for sterling throughout the trading session.

USD

Yesterday we had no major news from the US. It sold off against the Canadian dollar and the Aussie dollar throughout the day.
Today the core retail sales will be coming out at 13:30 and are expected to have a lower reading than last month going from 0.3% to an expected 0.1%. The core retail sales are considered a better gauge for the underlying trend since there are no automobile sales included.
USD/ZAR is trading around the highest level since the middle of 2009. The retail sales are being released at 11:00 from South Africa today with the expectation of a significantly lower reading than last year it might well affect the USD/ZAR massively.

JPY

Yesterday we had the Tertiary Industry Index showing increased purchasing from the businesses in Japan. It went from -0.4% at the previous reading to 1.4% exceeding the expectation of 0.8%. The market reacted accordingly and we saw a brief strengthening of the Yen. Tonight the quarterly GDP figures will be released expecting to go from negative 0.9% growth to positive 0.1% growth. A variation from this will result in volatility.

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Written by Tom Tong

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