Euro and dollar relaxed their strangle hold on sterling yesterday although GBP still remains pinned in an uncomfortable position. Hedging levels on GBP crosses are therefore a little better although opinion is split as to whether we will see more especially with today’s volatile CPI reading due.

Data from the US yesterday was mixed with industrial production data jumping 1.3% higher although this is against a September figure which was sharply lower in the aftermath of Hurricanes Gustav and Ike. Empire State manufacturing was lower however as respondents reported an increased tightening of credit standards which has seen delayed payments to vendors and seen workforces cut.

As stated above today’s CPI figure out of the UK will be closely watched in light of the Bank of England’s Inflation Report last week. PPI fell by a full 1% earlier this month but similar falls on the CPI number are unlikely. The consensus estimate is fall to 4.8% from 5.2% and to be honest we can foresee scenarios where either a strong or a weak figure proves difficult for sterling to deal with. Scenario one is that CPI is released below 4.8% and the market puts more weight behind thoughts that the Bank of England’s estimations of CPI below 1% in the near future. Scenario two is that it is released above 4.8% and therefore further interest rate cuts may be needed by the MPC. RPI is also due today and weak falls are predicted as interest rate cuts fail to be shown in some mortgage products.

 Please feel free to contact me (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:

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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.