Pound falls. BoE minutes & Exchange Rates

Good Morning. Rates for GBP/EUR yesterday broke breifly through 1.17 after better than expected inflation data. We’ll look at this in detail in a moment, but first a snapshot as rates stand as 08:30am 19th August 2009:

  • GBP/EUR 1.1671
  • GBP/USD 1.6450
  • GBP/AUD 2.0029
  • GBP/NZD 2.4526
  • GBP/CHF 1.7711
  • GBP/CAD 1.8213
  • GBP/JPY 154.99
  • GBP/ZAR 13.279

UK Inflation
The Key measure of inflation in the UK has unexpectedly remained at 1.8%. Economists had expected the Consumer Prices Index (CPI) to decline to 1.5% in July. The Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments, also unexpectedly rose to -1.4%, from -1.6%.

The RPI rate has fallen sharply over the past year as the Bank of England slashed interest rates to a record low amid a recession. The figures suggest that deflationary pressures on the economy may be easing. The Bank aims to keep inflation at 2% to maintain price stability and more broadly, economic stability.

Earlier this month, the Bank said it was “more likely than not” that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn and stay low until the end of its two-year forecast period.

The better than expected figures caused a brief spike, however it was short lived as is often the case, and this morning rates have already dropped back into the 1.16’s against the Euro.

Another reason for the retraction is better than expected German Producer Price Index this morning. This has strengthened the Euro, and pulled rates back.

Other data today
At 09:30am we have the Bank of England minutes. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Watch closely for comments regarding the recent Quantitative Easing, as negative comments could cause the pound to fall further. If it shows all members voted for the increase, then expect the pound to fall.

Summary
The pound is very volatile at present, caused by uncertainty over economic recovery, and also risk sentiment being driven by events in the USA as outlined in this blog previously. It’s impossible to predict which way rates will go, however in uncertain times such as this, rates can move very quickly. If you need to purchase currency, dont leave it to chance. Consider the risk, and open an account with us. This will enable you to discuss the options available to you to get the best possible rate.

*** Newflash ***

BoE minutes just released. The pound has plummeted as it was revealed 3 members actuall voted for a futher £75bn to be pumped into the economy. Rates have falled over half a cent against the Euro in the last few minutes. Keep up to date throughout the day on Twitter

*** Newflash ***

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