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Sterling was the worst performing of the majors yesterday as the Bank of England (BoE) minutes showed that policy makers voted unanimously to continue the asset protection scheme despite the recent economic optimism. In a predictably cautious tone the BoE pointed to improvement in important indicators as “mostly encouraging” but warned not to get too carried away until there is further stabilisation in the markets.
Employment figures illustrated this for the BoE, revealing a rise in the unemployment rate to 7.1%, a total of over 2.25 million people now out of jobs. This was a stronger than consensus forecast but not enough to prevent the pound from slipping back against the euro and dollar.
Inflation figures stateside showed that prices have fallen year on year by the biggest drop in nearly 50 years. The result saw the dollar fall off, as the 0.1% reading failed to meet expectations of a 0.3% rise for the month. On the bright side, it is looking less and less likely that the deflation monster will be let loose on the American economy anytime soon, as consumer prices are showing signs of stabilising.
Equity markets globally were down, driving investors away from riskier assets. American markets were affected by a S&P downgrade of 18 US banks, noting that the current transition period justifies lower ratings. UK financial’s were also sold off throughout the day, which is never a good thing for sterling.
Today we look for CBI industrial trends and UK retail sales to provide some direction for sterling, while the US has initial jobless claims and Philadelphia Fed index
World First’s Twitter page is up and running and we will be live ‘tweeting’ the impact of all these data releases and how they affect the markets. Click below for up-to-date news on all things currency. The address is http://twitter.com/World_First
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