Can consumer prices inflate sterling’s value

25 March, 2014

Rob Bastin

Another quiet start to the week allowed for the sterling selling to continue despite early improvements. The pound found itself opening the week higher against the Euro and Dollar after PMI figures for the Euro-zone and for Germany all fell slightly short of expectations. German manufacturing and services PMI saw the biggest shortcoming with figures showing a growth of 53.8 against a 54.6 consensus for manufacturing and 54 against a 55.5 consensus for the services sector. The Euro-zone PMI figures as a whole where slightly lower whilst still posting a positive growth figure.

At lunch time the US manufacturing PMI was also short at 55.5 when 56.5 was forecast however this figure was still stronger than that of the Euro-zone. As the day developed traders took advantage of the higher selling levels as the pounds gains were reversed by close of business. This price action is always concerning as it underlines the negative sentiment towards sterling at the moment.

Anyone looking to send money overseas in the short term will be relieved to hear that this morning’s Consumer Price figures for the UK have come out a fraction higher than expected whilst still dropping 0.2% on the year. Inflation was up to 1.7% from 1.6% last month which has subsequently supported the pound in early trading as it picks up from its current lows. With more key data out later this week this could still just be a brief spike like yesterday so keep in close contact with your broker so that you can be update on any developments that effect your requirement. 

This afternoon the US is back in focus with consumer confidence and new home sales figures at 2:00pm. Perhaps of more interest at 4:00pm we have the latest speech from ECB president Mario Draghi who will no doubt look to further bolster the Euro as its recent rally has started to run out of steam.