An increase in the UK’s rate of inflation was overshadowed yesterday by a strong US retail sales figure that allowed the greenback to fight back after it slid on Moodys’ credit warnings yesterday. The Fed’s decision to keep everything as is and not increase the amount of asset purchases it will perform also added to stiffen the dollar. Once again Thomas Hoenig was the only dissenter and the attached language was the same stuff we’ve been fed for a while with no real economic or nutritional content.
As you may have seen on news reports last night Silvio Berlusconi managed to survive the two votes of confidence put against him by Italian lawmakers. The results led to scenes of street violence and lawlessness emblematic of the problems Southern Europe has faced over the past year. Whether these decisions will lead to an early election remains to be seen but the risk premia on Italian assets looks set to remain higher in the short term.
Those of you who attended last week’s webinar will have heard me speak of the problems facing Belgium and its potential impact on the Eurozone. S&P yesterday gave another warning by downgrading Belgium’s outlook to negative on the basis that it has not had a government for 6 months. This morning’s decision by Moody’s to review Spain’s credit rating has also hit sentiment and has put European assets back on their heels.
After all this UK inflation was a bit of a damp squib but it still shows that price rises are here in the UK and probably here to stay. The pound rallied briefly on the news as traders scaled back bets on the likelihood of further QE here in the UK.
Data is once again led off by a UK measure this morning with UK jobless claims and ILO unemployment due at 09.30. Jobless claims have been declining since August although the market expects the pace of those falls to moderate this month to 3k against last month’s 3.7k.
We also have US CPI and Empire Manufacturing at 13.30 while Industrial Production hits us at 15.00
Latest exchange rates at time of writing
| Indicative Rates | Sell | Buy |
| GBPEUR | 1.1806 | 1.1832 |
| GBPUSD | 1.5839 | 1.5862 |
| EURUSD | 1.3315 | 1.3333 |
| GBPJPY | 132.10 | 132.39 |
| GBPAUD | 1.5845 | 1.5871 |
| GBPNZD | 2.1005 | 2.1041 |
| GBPCAD | 1.5832 | 1.5873 |
| NZDUSD | 0.7474 | 0.7502 |
| GBPZAR | 10.74 | 10.79 |
| USDZAR | 6.8278 | 6.8575 |
| GBPPLN | 4.6930 | 4.7220 |
| EURJPY | 111.71 | 111.96 |
Rates are dependent on amount transacted.
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