Inflation stays put as markets await Bank of England
19 December, 2012
Tuesday was all about UK inflation and whether we would see a drop in levels, currently the highest since May. But the drop didn’t come, the rates held at 2.7% which gave the pound a boost against most major currencies.
The rally came as high inflation leaves less room for the Bank of England to increase asset purchasing, which effectively devalues the pound. This sentiment gave the pound the legs to push even further up against the broadly weak US dollar, reaching fresh 2 1/2 month highs – great news for anyone looking to send money over to the States.
The weak dollar is having an adverse affect on the single currency, as we have spoken about in recent months. The Euro continued to strengthen against the dollar and held strong against the pound despite some concerns from ministers over the ability of Greece to stick to the required austerity measures. The euro continued its recent trend against the pound, although only small, finishing up against sterling although the daily range was very tight.
Now the markets wait for the minutes this morning to see how BoE members voted in the recent policy decision where interest rates and asset purchasing was kept on hold. If the minutes point towards a dovish stance (lower interest rates for a prolonged period) the pound could be in for a rocky ride in the coming days. Retail sales and final reading Q3 GDP to come later in the week may also add to the volatility, so stay in touch to avoid any potential upsets with your upcoming transfer.
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