Concerns heighten over Ukraine crisis

Tom Tong16/Apr/2014Currency Updates

GBP

London closed with the pound slightly up against the dollar and with further gains against the euro.

Markets focused on the morning release of UK inflation data. The inflation data was a pleaser for the pound and for the wider UK economic situation, coming in at the lowest levels since the summer of 2009. Consumer prices rising at such a slow pace could flip the pressure on worker’s incomes, from years of above target inflation. Inflation at 1.6% is far above the official BoE target of 2%.This bodes well for current monetary policy and will be received well by the BoE. Opinion is split as to where inflation goes for the rest of the year, falling import prices, recovering productivity and stable commodity prices could push it lower, however on the flip side, rising wages could keep inflation from further dipping.

Big day for the pound today with the unemployment rate, claimant count and average earnings set for release.

EUR

The euro dipped against the pound, following strong UK inflation data, however pushed up against the dollar. The German ZEW survey was a disappointment falling for a 4th consecutive month, this saw a slight euro slip; however losses retraced later in the day. The euro took leverage from the escalating situation in Ukraine. Rising tensions fuelled safe haven bids for US treasuries, driving down bond yields and hurting demand for the dollar.

The euro also found some support from ECB noises dimming over the weekend. The week kicked off with the euro seeing a sell off, following Draghi’s alluding to the likelihood of further intervention on monetary policy, with the aim of countering the ever present threat of deflation. Specifically Draghi said- “the strengthening of the exchange rate would require further monetary policy accommodation”

We have Eurozone CPI set for release today.

USD

London closed with the dollar slightly down against sterling and the euro. US economic data did little to support the dollar. Data showed an uptick in US inflation that boosted the currency early in the session; however this was later offset by disappointing US homebuilder sentiment and manufacturing data.

The worries surrounding Ukraine got the market pranging and led to hot money tipping into US Treasuries, driving down the yield on bonds and easing demand for the dollar. US stocks ended a choppy session in a higher position. The closing bell saw all 3 indexes seeing uplift, the tech sell off has slowed in its intensity however it’s still a sea of red with the tech sector losing a 5th of its overall value and 100’s of billions wiped of their value.

Data of note today includes US industrial production figures.

Print

Written by Tom Tong

Vestibulum id ligula porta felis euismod semper. Donec ullamcorper nulla non metus auctor fringilla. Cras justo odio, dapibus ac facilisis in, egestas eget quam. Morbi leo risus, porta ac consectetur ac, vestibulum at eros. Donec ullamcorper nulla non metus auctor fringilla.