Sterling continues to strengthen over the Euro and there doesn’t look like there will be much respite in the coming weeks. Greece CPI (Consumer Price Index) figures were released yesterday. CPI is a key indicator as to the measure of inflation, it is based on how much consumer goods have varied in price over a specific period. With the ECB (European Central Bank) desperately trying to stimulate inflation it doesn’t help when Greece’s CPI data, although expected to fall from 2.8% to 2.5%, falls much lower to 2.2%.
This along with general market sentiment caused GBP/EUR to break through the elusive 1.40 mark. Industrial production figures are due out today and I expect there to be a significant increase which I think will be enough to push through 1.42.
There is little data releases of much consequence for the rest of the week but next week Eurozone CPI figures are due out. I have little faith in any rise and although there is expected to be scant movement if we see a drop the Euro could be in further trouble.
One of our top brokers, Dale Littlejohn likens current GBP/EUR conditions to that of a stretching elastic band, eventually it will snap back, which could be sooner rather than later with the uncertainty of the General election just around the corner.
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Janet Yellen the chair of the board of governors at the Federal Reserve has indicated that the stunted inflation figures recently released were due in main to the drop in oil price and are not a massive cause for concern.
Her bullish stance continued as she hinted to a possible interest rate hike as early as summer.
We have also seen a drop in US unemployment which caused a further boost for USD against the pound.
US Retail figures are due out tomorrow and I expect to see a significant rise. Adverse weather conditions earlier in the year poleaxed US retail, so I expect further USD gains.
My opinion is USD will continue to gain momentum and will be firmly sat in the high 1.40s by May.
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GBP/AUD is currently in the 1.98s. Sterling’s recovery after the RBA’s (Reserve Bank of Australia) reluctance to drop interest rates seems to again be halted whenever it closes in on the 2.0 level.
Australia has a heavy reliance on China, as China make up a sizeable chunk of Australia’s exports. With Chinese growth improving we should see AUD strength. However, the powers that be are fully aware that an expensive AUD could make Australia’s exports less attractive and this is when we see jawboning from the RBA to artificially weaken the currency if it becomes too strong.
There is a strong possibility this is why we see the constant toing and froing in the 1.90s.
Short term, Unemployment Data is due out later today and the general consensus is there will be a fall in which there is a strong chance of AUD gaining value.
If you are a AUD buyer I feel purchasing at current levels is not a bad move, as no doubt the AUD will strengthen if we get near to the 2.00 level.
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