Sterling remains near 19 month high

Wednesday 18th April 2012
Good morning. Not an awful lot to report from the Currency Markets, as Sterling exchange rates continue their relative stability and remain fairly range bound. The Pound did however gain against the US Dollar yesterday after data showed UK inflation ticked up as expected in March.

UK Inflation strengthens the Pound

Data released yesterday showed that UK inflation rose to 3.5% last month. This caused the Pound to gain because it makes it more likely that the Bank of England will not inject more stimulus into the economy next month. Previous Quantitative Easing had weakened the Pound.

The next focus for the Pound will be later this morning, when the Bank of England MPC meeting minutes for March are released. This will show how the members voted and what was discussed.

While all nine members of the MPC are expected to have voted to keep rates on hold, the minutes will be scrutinised for any hint on whether policymakers would consider another round of quantitative easing when the current programme ends next month.

More confidence in Europe

There was cautious improvement in sentiment towards the euro zone yesterday, helped by a much more positive German ZEW business survey. Usually good news from Europe would strengthen the Euro, and cause exchange rates to fall.

This didn’t’ happen however, due to the current global climate meaning good news for Europe is also good news for the Pound, and so the data failed to boost the euro against the pound. Sterling remains around a 19 month high vs the single currency.

Today’s Data

Unemployment data is the main UK release today in addition to the BoE minutes. In the EU there are Current Account measures which measure the net flow of funds in and out of the Eurozone, so expect some EUR volatility. Later in the day some inflation measures are released from New Zealand

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