UK inflation disappoints

After an extremely quiet phase in the currency markets, this week promised to re-ignite the volatility levels with a string of major economic releases for the UK. The markets have been consolidating recently with an absence of data and currency rates can only stay flat for so long before breaking out. Over Monday night the pound rallied a cent against the Euro and US Dollar in anticipation of positive inflation data yesterday morning. After recent concerns of rate cuts due to dropping inflation levels, experts for forecasting a hold on the annual growth of 0.5% and another monthly increase of 0.3%. This saw the pound rally to nearly 3 week high at the open with traders pricing in this expectation. Unfortunately the actual figures missed expectations by 0.2% on both the monthly and annual growth expectations, causing the pound to reverse much of its gains over the course of the day.

The afternoon session switched the focus to the US Dollar with their latest inflation figures also to be announced. Results showed 1.1% annual growth and a 0.4% growth in the month of April. These stats met market expectations and so the US Dollar failed to make any significant gains with the greenback already on the back foot due to ongoing delays in interest rates hikes from the Federal Reserve.

Continuing the busy week on the economic calendar, this morning will see the announcement of the latest unemployment and average earnings figures for the UK at 9:30am before it is the Euro-zones turn at 10am to release inflation figures. UK unemployment rate is expected for no change at 5.1% but the markets will be watching with a close eye for any change in the average earnings figures. GBP/EUR buyers or sellers should keep a close eye on rates in the next 48 hours as results are likely to set the tone for the next week or so. Those with an interest in the US Dollar will want to bear in mind the FOMC minutes that will be released at 7pm this evening, as indications on rate hike timings could be provided and this would be pivotal for the strength or weakness of the greenback over the next month or so. Speak to your broker today to ensure you are ready to act accordingly following these important announcements.