GBP Exchange Rates

Following what was a relatively quiet day for economic data, today we have a raft of economic data for the UK, Eurozone and the US. This morning we have already heard the latest inflation data for the UK which came out as expected at 1.6% another drop from last months 1.7%. As mentioned yesterday in this currency report this is a worrying trend as it is following the current pattern set by the Eurozone who are also seeing their inflation fall and are getting concerningly close to deflation which could cause major issues for the single currency economy. The fact that UK inflation had been holding steady at around the 2% target level for so long had supported Sterling against most the major currencies, especially the Euro whose inflation had been falling. So, with inflation in the UK now following a similar trend to the Eurozone it could mean we see Sterling Euro exchange rates fall from the current high levels. Tomorrow’s Uk unemployment and Eurozone inflation data will be key in determining the short term trend for GBP EUR and some positive unemployment and weaker than expected Eurozone inflation data could result in Sterling pushing back up towards the highs we saw at the start of the year.

USD Outlook

This afternoon across the Pond we have inflation data for the US which is expected to show a decent improvement which would continue to support the Fed’s decision to taper their bond buying scheme as it is another good indication that the economy is moving in the right direction. There is also a speach from Janet Yellen the head of the Fed which, if it follows some strong inflation data may be a very positive talk and there is even the outside chance that we will hear Mrs Yellen talk about increasing the rate at which the Fed are tapering. Finally the US also announce some house price data which will give a good insight into how the US housing market is performing which is, similarly to inflation figures, predicted to show an improvement.