Hello and welcome to the Pure FX market report for Tuesday 15th February 2011.
The euro was the big loser on the markets yesterday following a string of bad news. EU finance ministers agreed to double the EFSF bailout capacity, but failed to negotiate specific measures to help indebted EU nations. In addition, there are concerns that German bank WestLB could collapse if it doesn’t present restructuring plans to the European Commission by tonight.
This morning meanwhile there has been more negative data from the euro zone. GDP estimates for 2010 fell to 2.1% according to data today – falling against expectations of 2.1%. In addition the latest economic sentiment figures from ZEW have arrived at 29.5 against hopes of 31.3. This indicates that economic sentiment in the euro zone isn’t as good a hoped
Neither sterling nor the US dollar have benefited from these loses. In particular the US dollar fell as the markets gained confidence in the global outlook. The announcement over the weekend of Egyptian President Mubarak’s resignation especially added to this. Looking ahead, there are concerns about President Obama’s budget proposals, but details haven’t emerged yet.
In the UK meanwhile this morning the latest CPI (Consumer Price Index) figures have been released. These are a key measure of inflation, and heavily influence sentiment toward the UK. This morning the CPI has arrived at 4.0% – compared to forecasts of 4.1% and 3.7% last month. This indicates that inflation continues to rise in the UK, though not as much as the markets predicted.
This will come as welcome relief to the Bank of England, which has faced mounting pressure to increase interest rates to combat inflation.
In addition to the CPI lots of other data has been released too. For instance, the DCLG house price index for December shows that house prices modestly rose in the last month of 2010 The index rose 3.8% compared to 4.0% the month before and hopes of a 4.3% gain. Finally the RPI (Retail Price Index) has been released too, and shows a 0.3% increase in retail prices for January compared to 0.7% last month.
There’s a string of announcements from the EU later today. For instance, the GDP estimates for the fourth quarter of 2010 are due to be released, in addition to the latest trade balance. There’s also the latest economic sentiment survey from ZEW for the EU too.
From the US meanwhile the President of the Treasury Timothy Geithner is scheduled to make a speech tonight, and the latest ABC consumer confidence figures are released too.
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