Sterling falls following inflation figures, with the Bank of England and FOMC minutes set to dominate tomorrow (Mike Vaughan)

GBP EUR Looks to Employment Figures for Support
Michael Vaughan
Michael Vaughan

Sterling exchange rates posted losses against most major currencies today following the UK’s latest inflation figures. Levels fell to 1.9% and below the Bank of England’s target level of 2%. This has made chances of the bank raising interest rates even less likely in the short to medium term and would suggest the record low levels of 0.5% will remain for some time. This has put pressure on sterling with levels reaching a low of 1.2135 against the Euro and 1.6655 against the US dollar. This could be a real opportunity for buyers of sterling as with unemployment figures and the important Bank of England minutes released at 09:30 tomorrow morning the pound could easily see a reversal.

Looking at other data of note look out for inflation figures from the US at 13:30 tomorrow followed by the FOMC minutes at 19:00 from the FED’s interest rate decision earlier this month. As with their UK counterpart the FOMC minutes will give insight as to future monetary policy from the FED and in particular any changes to policy since Janet Yellen has taken over from Ben Bernanke as the head of the Federal Reserve. For me it is likely they will continue with their stance on QE and look at reducing levels by $10bn per month. This I am sure will lend support to the US dollar in the months to come and may also create a shift for currencies such as the AUD and NZD.

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