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Pound Falls In Spite of Easing UK Inflation

Pound News: BoE Rate Hike Odds Weakened by Falling Inflation

Markets were not particularly encouraged by news that the UK consumer price index had dipped to 3% in December, leaving Pound (GBP) exchange rates on a weaker footing.

As inflation started to ease back towards the Bank of England’s (BoE) 2% target this was seen to reduce the odds of policymakers raising interest rates again in the near future.

Even so, Sterling could find a rallying point in the near term if commentary from BoE policymakers proves more hawkish in nature.

 

Euro News: German Coalition Hopes Dented by SPD Vote

News that the Berlin branch of the SPD had voted against the prospect of a fresh coalition with Angela Merkel’s CDU spooked the Euro (EUR), raising fears of another failed round of talks.

EUR exchange rates came under further pressure as a result of a surprise contraction in the German wholesale price index, which suggests that domestic inflationary pressure is weaker than hoped.

With no change forecast for the finalised Eurozone consumer price index data the Euro may struggle to find any particular support today.

 

US Dollar News: Disappointing Manufacturing Index Failed to Prevent USD Rally

With US markets open once again after Monday’s bank holiday US Dollar (USD) exchange rates returned to a general uptrend, ending a sustained run of bearishness.

Even though the Empire manufacturing index for January proved rather lacklustre, falling to 17.7 from 19.6, this failed to dent the recovery of the US Dollar.

As forecasts point towards an uptick in US industrial and manufacturing production in December confidence in the world’s largest economy could improve, to the detriment of the Pound to US Dollar (GBP/USD) exchange rate.

 

Canadian Dollar News: Anticipation Builds Ahead of BOC Rate Decision

Even though oil prices eased somewhat on Tuesday the Pound to Canadian Dollar (GBP/CAD) exchange rate remained on a downtrend.

As investors brace for the imminent Bank of Canada (BOC) policy meeting, and its likely interest rate hike, demand for the Canadian Dollar has naturally picked up.

However, if policymakers adopt a less optimistic tone at today’s meeting this could see CAD exchange rates quickly reversing their recent gains.

 

Australian Dollar News: Strong Consumer Confidence Unable to Boost AUD

As markets returned to a more risk-averse mind-set the Australian Dollar (AUD) came under renewed pressure, especially as the US Dollar strengthened.

While the latest ANZ Roy Morgan weekly consumer confidence index showed an improvement this was not enough to keep AUD exchange rates from softening.

Mounting anticipation for tomorrow’s Australian unemployment data is likely to keep the Australian Dollar from making any particular recovery today.

 

Upcoming Data

Wednesday, 17 January

10:00     Eurozone Consumer Price Index

14:15     US Industrial Production

15:00     Bank of Canada Interest Rate Decision

 

Michael Vaughan

Currency Dealer

01442 892 061

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