Daily Market News 18 May 2011

Yesterday’s Market Movers

From the UK we had the CPI and Core Inflationary figures both came out much better than predicted. CPI figure rose from 4.1% to 4.5% (YoY) and from 0.7% to 1.0% (MoM) and Core CPI rose from 3.2% to 3.7%. For the CPI this was the highest reading since October 2008 this has indicated that the BOE will raise interest rates at some point this year but has not guaranteed a specific month. We witnessed Sterling jump more than half a cent against the US Dollar to 1.6303 and Sterling pushed through key levels of 1.15 against the Euro.

From the Euro-zone we had the ZEW economic sentiment survey which came in worse than expected at 3.1 from an expected 4.4. We witnessed EUR-USD rise 50 pips from the back of this information, as well as this an EU minister mentioned that a 78billion bailout plan for Portugal was approved which also added support to the Euro.

From the US we had building permits and housing starts figures, both figures came in worse than expected and we witnessed risk aversion in the US Dollar which traded to as low as 1.6173 against the pound, from the figures this has indicated that the housing market and unemployment at 9% has been struggling to improve for almost two years.

From the UK we have the Bank of England minutes which will show a full account in detail of how many policy members voted for a rate hike for the last interest rates meeting. The last vote was 3-6 in favour to leave rates on hold. It will be interesting to see if there are any dramatic changes but if the figure stays the same we could see Sterling weakness.

Also from the UK we have the unemployment rate which is expected slightly higher from a previous 7.9%. If the figure comes in higher we could see GBP drop slightly as this is a bad figure for the economy.

From the US we have the FOMC meeting this evening. This will review the current economic and financial conditions in the US, main problems there from recent figures is the housing market and the unemployment rates.