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UK inflation surprised to the upside yesterday with RPI 0.4% and CPI 0.3% above consensus respectively. These are large deviations from expected figures and shows exactly how ’sticky’ the inflation in the UK has become. While sterling positive in the short term, with markets concentrating on QE and its effect on demand, this does put a risk to sterling in the medium term. A CPI figure above target is all well and good but given that activity is so low in the UK increases are to be expected.

Markets bolstered GBP in the aftermath against both USD and EUR although gains were limited by ’strong dollar policy’ and strong business confidence from the EU.

Much has been made over recent days on the subject of the dollar’s future as the global reserve currency. The BRIC meeting yesterday was insubstantial in its comment on all things forex and has allowed USD to strengthen. The euro strengthened by 1.2% from its overnight low against the dollar as the influential ZEW index showed that sentiment in the German economy was significantly higher than it has been over the past 6 months.

Data today is mixed and features  releases from central banks. Bank of England minutes will be viewed for signs over the long term inflation outlook, reaction to the S&P downgrade and the rally in sterling. This document could set the tone for the pound for the next 4 weeks; it is released at 09.30. Ben Bernanke speaks at 17.00 and could strengthen the dollar towards the end of the day

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Please feel free to contact me jeremy.cook@worldfirst.com(jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange on 020 7801 9050 or ourPrivate Client Currency Exchange on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms..

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