CPI figures for the UK printed a 16 year high as higher fuel and food costs further increased pressure on the purse strings of the average UK household. The biggest increases were seen in the food and non-alcoholic beverage and the housing and household services sector as was to be expected. We believe this will more than deter the MPC from cutting rates to stimulate growth with some analysts predicting that we may see a CPI figure of 5.5% in the near future, nearly 3x target. As a result cable vaulted to 3 month highs posting an intraday high of 2.0152

This was not the piece of data we were monitoring closest however as Ben Bernanke testified to the Senate Banking Committee on the state of the economy. He tried his damnedest to avoid any mention or allusion to recession but seemed unable to provide anything but a hint towards a stagflationary period. Stagflation is the barrel that most economies are staring down at the moment; a ghastly cocktail of stagnating growth and rocketing inflation.

Oil also retreated on the back of Bernanke’s comments, at one point down by nearly $10 on the day. This allowed dollar to regain some ground against the pound and the euro; that cross heading through the $1.60 barrier for the first time in history.

Looking forward to today inflation will very much be the theme with CPI releases from the US and the Eurozone plus the continuation of Chairman Bernanke’s testimony and the release of the latest Fed minutes.

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 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.