Inflation rise up, up and away

13 August, 2013

Paul Newfield

The Pound remained stable against all of the major currencies yesterday, as no major market moving data was released. Today, however, could well be a different story – we will see how the plot unfolds with key data releases from the Eurozone, Germany, the UK and the US. Yesterday did see confirmation that house prices are soaring across the UK. Data produced by RICS showed a reading of 36% as oppose to consensus of 25%. The increase in house prices is further indication that the UK economy is now learning how to walk rather than crawl, metaphorically speaking – but we are still miles away from “sprinting” however, so a long way still to go. Never-the-less we did see the £-€ rate stabilise yesterday and was never more than a fifth-cent different all day which has bee the case, really for the last six days. As for today, the shed-full of data began with German CPIs, which came in as expected, no better or worse, at 1.9% (yoy) and 0.5% (mom) – so the price of Bratworst, leder-hosen and a VW remain, on average, the same as previously – no fear of inflation increases here. Later this morning some potentially game changing UK CPI data is released, similar to the German data earlier, it will indicate any increase in price for the goods and services we purchase, which is an indicator as to whether we need a promotion of inflation levels. Simultaneously released, we also have PPI data releases, again a major player which will show us which currencies win, lose or draw against Sterling, which really, along with the CPIs has the widest scope to push the Pound up and over the structural levels of resistance or bring it crashing down through into the lower echelons. A brief summary of todays major data releases are as follows: 9:30 – UK CPIs & PPIs 10:00 – EUR ZEW survey – economic sentiment 1:30 – US – retail sales The above data releases have the ability to make or break the Pound today so please keep up to date and in the know by contacting your Currency Index account manager when save money overseas.