Sterling tumbles to twelve month low as Eurozone inflation forecasts are cut

Claire Hogarth14/Nov/2014Currency Updates

GBP

Sterling fell again to its weakest position in more than twelve months, gradually declining against the Dollar during the course of the day to finish 0.35% down. The UK currency has now fallen close to 1.5% in the past ten days.

The Pound took a hit after Monetary Policy Committee member, Ben Broadbent, spoke yesterday claiming that disinflationary trends would remain in place for a while. Sterling got no help from the release of the Royal Institution of Chartered Surveyors housing price balance that fell last month to its lowest level since June 2013. However, the report suggested that the slowing property prices may only be temporary, with surveyors confident the market would pick up in the medium term.

No major announcements in the UK today with the next meaningful releases the inflation data on Tuesday followed by the monetary policy minutes on Wednesday morning.

EUR

The single currency continued its charge on the pound, appreciating for a third consecutive day, this time by 0.45%. Weak US data allowed the euro to climb on the dollar by 0.2%, although it remains 0.2% down this month.

There was a string of inflation data out among Eurozone nations yesterday. CPI in both Italy and France increased YoY by 0.1% and 0.5% respectively, while inflation in Germany was down in October from the previous month, although remained positive at an annualised 0.8%. The Consumer Price Index in Spain, however, remained below zero for the fourth consecutive month at -0.1%. In their monthly report issued during morning trading the ECB warned that inflation would remain at current low levels over the coming months, due in large part to the plunging oil prices that dipped to a new four year low on Thursday, now below $79 per barrel. Inflation forecasts for this year were lowered from 0.7% to 0.5%, while outlook for 2015 was cut 0.2% to 1.0%.

A host of European countries announce their GDP data today. France and German figures are announced before trading so most volatility is expected at the Eurozone GDP release by Eurostat at 10am GMT.

USD

Another mostly stable day for the US currency as the Dollar traded within a narrow band against its major counterparts. The US Dollar index finished the day marginally down by 0.05%.

Comments by New York Federal Reserve Bank, William Dudley, caused the Dollar to weaken against the Euro on Thursday morning. Dudley urged for patience on the timing of interest rate hikes in the US, leading to greenback falling by 0.2% against the single currency. Elsewhere, weekly initial and continuing jobless claims both rose unexpectedly, although more importantly, the four week moving average remains close to the fourteen year low obtained in October. Encouragingly for the US economy, this marked the ninth straight week that claims had registered below 300,000.

The main announcement across the pond today is the release of retail sales for October at 1:30pm London time. This will be followed by the Reuters consumer sentiment index at 3pm, with both expected to show improvements on last month.

Rest of the world

In a surprise move, the National Bank of Serbia unexpectedly slashed interest rates by 50 basis points to 8%, its lowest level since August 2010 with lower than targeted inflation and a falling dinar cited. The falling price of crude oil is bad news for the Russian economy, with the Ruble sliding to a four year low after weakening by 1.5%, the largest drop of all emerging market currencies. Elsewhere, the Chinese economy showed more signs of weakness with industrial production and retail sales both coming in below expectations for October at 7.7% and 11.5% respectively.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.