Inflation in the UK is proving to be a lot more hardy than we economists thought as the weaker pound makes imports a lot more expensive offsetting the benefit of lower fuel and housing costs.

CPI was predicted to be released at 2.7% but only fell by 0.1% to 3.0%. This does however lessen the chance of substantial quantative easing and hence sterling rallied higher against all of its trading crosses.

The euro was driven lower by negative sentiment out of eastern Europe which has seen EM currencies (PLN, CZK, HUF) weaken substantially. Moody’s, the debt rating agency, downgraded a swathe of eastern European banking interests on fears loans would not be able to be paid back. Given that most of these loans are to banks headquartered in Euro using countries, the outlook for the single currency has become a lot darker.

Overnight President Obama signed the stimulus package or, to give its legal name, the ‘American Recovery and Reinvestment Act’ into law. Whether the ARRA will turn out to be an ERROR remains to be seen.

Further analysis is of course always available at our video blog http://uk.youtube.com/user/WorldFirstJC

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: Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team 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.

To view any past or present currency blogs please click on the following link www.worldfirst.com/blog

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