King in Search of a
Weaker Pound

An improved UK outlook saw sterling make gains across the
board yesterday, before returning to similar levels against both the euro and
dollar at the close of play.

At 2.7%, the UK’s higher than expected inflation result
prompted a sudden burst of strength causing the pound to hit its highest level
since Oct 1^st. UK housing data was also a contributor, returning
more positive than expected, albeit still showing negative sentiment.

King in Search of a
Weaker Pound

An improved UK outlook saw sterling make gains across the
board yesterday, before returning to similar levels against both the euro and
dollar at the close of play.

At 2.7%, the UK’s higher than expected inflation result
prompted a sudden burst of strength causing the pound to hit its highest level
since Oct 1^st. UK housing data was also a contributor, returning
more positive than expected, albeit still showing negative sentiment.

The gains made on the euro and dollar were reeled in as
suggestions that a €44bn fund could be organised on Greece’s behalf by Germany.
Investors will remain sceptical; however the combination of these rumours and a
successful Greek bond auction caused the euro to fight back against earlier
losses following poor German economic sentiment.

Today a plethora of data is released, US retail sales being
the pick of the bunch; however the fiscal cliff worries continue to generate a
stubborn dollar that represents the cover of safety. Conversely, with
aspirations of a weaker pound, Governor of the Bank of England, Mervyn King,
could allude to further stimulus in his speech later this morning which could
cause sterling to drop off.

As a concluding thought, if Mr King does indicate further
easing, foreign currency buyers could be rewarded for remaining responsive. By
securing their future needs now, with sterling in its current position,
investors and businesses alike could protect their downside risk exposure.

 

Today’s Key
Announcements:

• 09.30am – GBP – Claimant Count Change: expected to decrease
  by 0.5k
• 09.30am – GBP – Unemployment Rate: expected to stay level at
  7.9%
• 10.00am – EUR – Industrial Production: expected to contract
  by 1.6%
• 10.30am – GBP – BOE Gov King Speaks
• 10.30am – GBP – Inflation Report
• 13.30pm – USD – Core Retail Sales: expected to reduce to
  0.3%
• 13.30pm – USD – PPI: expected to reduce to 0.2%
• 19.00pm – USD – FOMC Meeting Minutes

 

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