UK inflation figures
this morning

Yesterday sterling gained across the board as impressive
house price data spurred an early morning rally lasting through lunch. Cable
reached a two month high, before consolidating its gains later in the day.

The movement was in part aided by perceived progress on the
US fiscal cliff. It appears that congress is finally ready to engage in serious
negotiations to thrash out a deal. As the deadline approaches the pressure has
increased to find a solution to the planned spending cuts and tax raises.

UK inflation figures
this morning

Yesterday sterling gained across the board as impressive
house price data spurred an early morning rally lasting through lunch. Cable
reached a two month high, before consolidating its gains later in the day.

The movement was in part aided by perceived progress on the
US fiscal cliff. It appears that congress is finally ready to engage in serious
negotiations to thrash out a deal. As the deadline approaches the pressure has
increased to find a solution to the planned spending cuts and tax raises.

Republican House Speaker John Boehner ceded that raising tax
for the most wealthy would be necessary, though insisted that social spending
cuts were also a requisite to form a deal. Overnight President Obama made a new
offer to the Boehner, which could set the wheels in motion for preventing the
austerity, whilst also causing further dollar weakness.

Today the UK inflation data is expected to show prices
increased at the fastest rate since May. Ordinarily inflation devalues a
currency, but if correct, 2.7% inflation might show signs that demand is
picking up and that the economy could begin to improve.

Following the announcement the Bank of England will release
its inflation letter, reflecting on the figures and what they could mean going
forward. This could be a point for investors to watch, whilst already this
morning the positive sterling sentiment has continued in anticipation of the
release later.

 

Key Announcements
Today

• 09.30am – GBP – CPI y/y: expected to remain around 2.7%
• 09.30am – GBP – RPI y/y: expected to remain at 3.2%
• Tentative – GBP – BOE Inflation Letter
• 13.30pm – USD – Current Account: expected to marginally
  improve to -105bn