Pound pushes up against USD
The Pound has managed to keep within its recent range around 1.1950 against the Euro, as yesterday’s CPI figures have once again shown inflation remaining stubborn. As the CPI data has been higher than forecast 18 out of the last 26 releases, it’s a wonder why anyone is still surprised by the latest high inflation figures, but the 3.2% figure released yesterday was higher than forecast, and once again creates some uncertainty over the timing of any interest rate rises. Although Andrew Sentance voted for a rise recently, it was generally thought that he is one his own and is unlikely to sway other members (of the Bank of England MPC), however with inflation continuing to remain high, there is a possibility that others may reappraise their attitudes. The MPC will have seen the inflation figures before the last meeting, so the minutes released next week will be very interesting.
The inflation figures have helped the Pound make some strong gains against the US Dollar, which has been brought lower by the rise in risk appetite, which was not only given a boost by Greece, but also by some extremely good corporate earnings reports in the US. We are into the reporting season for Q2, and the latest good news came from Intel which reported record 2nd quarter sales, this came on the back of other good reports, and this has allowed the Pound to push up above 1.52 overnight.
The Euro initially came under pressure as Portugal’s credit rating was once again downgraded, this time by Moody’s who cut the rating by 2 notches to A1. The Euro lost ground after the revision, however this didn’t last long and as Greece successfully managed a €1.25bn bond auction, which is admittedly small, at rates below the 5% that the ECB had promised funding, the Euro, and risk appetite took, a jump. There was more good news for the Euro as the Greek finance minister said he expects Greek banks to pass the ECB’s stress tests ‘pretty well’. The Euro has managed to push back up above 1.27 against the Dollar, although the results of the stress test at the end of next week is still likely to weigh on the single currency.
We’ve already had the UK unemployment figures released today and they have showed the usual trend of falling claimant figures, but a rise in part time work, with average earnings rising a little lower than expected. The figures have given Sterling a little further boost this morning and it is unlikely that the rest of the days releases will hamper that.
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