Sterling rises on inflation data

Good morning. Sterling rose yesterday, after data showed that inflation is still above the BoE’s target. This added fuel to the argument for higher interest rates, boosting Sterling exchange rates. As at 08:30am 14th July rates are as follows:

  • GBP/EUR 1.1965
  • GBP/USD 1.5221
  • GBP/AUD 1.7224
  • GBP/NZD 2.1161
  • GBP/CAD1.5668
  • GBP/ZAR 11.406
  • GBP/HKD 11.832
  • GBP/NOK 9.4777
  • GBP/JPY 135.33
  • EUR/USD 1.2721

Inflation Figures boost Sterling

The consumer price index yesterday came in roughly as expected, although still well above the Bank of Englands target. Analysts said the data helped to boost sterling on the view that ongoing price risks may require the BoE to raise rates earlier than expected by the market, which sees the central bank starting to tighten in the second quarter of 2011.

When interest rates are thought to rise, it usually supports the currency concerned due to the higher return. In a speech on Tuesday, one MPC member said the BoE should start raising rates because economic conditions are improving, while adding that any tightening should occur only gradually.

Sterling has rallied in the past month in the wake of a general election in May and the new coalition government’s budget announcement, this rally has however now started to wain due the possible impact of tax rises and spending cuts on the overall economy.

Today’s Data

We have various unemployment measures for the UK today which could affect Sterling further. In the Eurozone, we have some inflation measures and industrial production. Later in the day from the USA, we have import prices and retail sales.

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