The pound continued to suffer against the majority of its peers yesterday ahead of today’s quarterly inflation report and Mervyn King’s speech.
Figures released yesterday showed that UK inflation remained at 2.7%, falling short of the 2.8% the market was expecting, underlining the case for keeping interest rates at 0.5%. Although the Producer price index came in as expected at 1.4%, investors remained cautious on the pound as today’s report could give scope for a downward revision for economic growth in the UK. Further losses in the pound could be seen if a downward revision is confirmed by Mervyn King.
Mario Draghi spoke in a press conference at Spain’s parliament yesterday, commenting that the country was on the right track and has been making “enormous progress”. The news enticed risk appetite as the euro strengthened during yesterday’s European session.
At the G7 meeting yesterday, finance ministers spoke about the recent issue of ‘currency wars’ stating that governments should not pressure central banks to intervene in the markets to devalue currencies and should leave price action up the markets. The yen drew support yesterday, rising by 1.7% against the pound.
10.00am – EUR – Industrial Production: Expected to rise to -2.3%.
10.30am - GBP – Bank of England Quarterly Inflation Report.
13.30pm – USD – Retail Sales: Expected to fall to 0.3%.