The UK Inflation rate fell to its lowest level since 2009 at 2.4% down from 2.8% as reported by the Office of National Statistics. This explained why fuel costs have gone down recently along with clothing prices and food, which could lead to further spending in the UK and increase confidence in the market. Sterling could however feel some pressure as the Bank of England minutes will be due out later today where results of the quantitative easing figures will be addressed.

The UK Inflation rate fell to its lowest level since 2009 at 2.4% down from 2.8% as reported by the Office of National Statistics. This explained why fuel costs have gone down recently along with clothing prices and food, which could lead to further spending in the UK and increase confidence in the market. Sterling could however feel some pressure as the Bank of England minutes will be due out later today where results of the quantitative easing figures will be addressed.

The USD reversed recent gains as Fed chairman Ben Bernanke said the Federal Reserve is ready to implement other measures to help support the US economy. Even though QE3 was not discussed in detail there is still a consensus for another round of QE which may well be discussed today at the release of the US Beige Book.  

As a result of the comments by Bernanke markets saw stocks fall yesterday. Standard & Poor’s 500 Index fell 0.3% to 1,350.00 in New York. However later on in the day Standard & Poor’s 500 Index added 0.7% to 1,363.67 at 4 p.m. in New York, wiping out earlier losses as Bernanke said that the Central Bank will be prepared to provide funding to boost growth.

Closer to UK, the Euro continued to trade low as ZEW economic sentiment declined. The Italian Prime Minister declared that Sicily could be subject to a bailout. On a slightly positive footing the cost of borrowing in the short term dropped for Spain whereas the 10 year bonds are still trading near 7%.

Today’s Fundamentals

09:30 Bank of England Minutes

09:30 UK Claimant count change (June) – Consensus predicts a major improvement in the count to 5.1k from 8.1k, which is very positive for the GBP.

09:30 Average Earnings including Bonus (3Mo/Yr) (Jul) – No change is expected at 1.4%.

09:30 Claimant Count Rate (Jun) –There is no change expected at 4.9%.

09:30 ILO Unemployment Rate (3M) (Jul) – No change is expected at 8.2%.

10:00 ZEW Survey – Expectations (Jul)

13:30 Building Permits (MoM) (Jun) – Consensus predicts 0.765M down from previous figure of 0.784M, which will be slightly bearish for the USD as a result.

15:00 Fed’s Bernanke testifies

15:30 Bank of Canada Monetary Policy Report

19:00 Fed’s Beige Book

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