Sterling continues it strong push on the currency markets

7 January, 2014

Tom Arnold

This morning Sterling continues is recent good but range bound form, sitting pretty just below the year long highs against both the Euro and the Dollar and many of the other major currencies. Things are still hotting up following the quiet festive period, and today provides a little bit of a ramp up following yesterday’s resumption of more serious data releases. All eyes will be firmly fixed on Europe, with two big releases due – German unemployment figures and European CPI inflation numbers. German unemployment is widely expected to remain steady, and CPI inflation is expected to show a slight decline. The unemployment level in Europe’s biggest economy is no real cause for concern and with fairly positive data releases, summed up this morning by positive retail sales figures, coming out of Germany, this is not likely to deliver too many surprises. CPI inflation however is much more of a concern for the ECB. The ECB has dropped interest rates recently in a bid to try and get people lending and hence spending again, but this stimulus has failed to give the anticipated results, with levels of private loans dropping by a further 2.3% in November alone. So dropping inflation gives more room for more stimulus, but the stimulus isn’t working, so what to do next for the ECB? In the US, the worst kept secret in world banking was realised last night, when Janet Yellen was confirmed as the first female Chair of the Federal Reserve. This appointment has been very widely anticipated and is not expected to cause any upset to the markets as she is of a very similar policy mindset to the current leadership. It is worth keeping in mind, with the markets starting to get back on track, and much uncertainty around, that the rates are very close to those year-long highs and as such if you have an upcoming requirement, having a discussion with your CI account manager about securing your rate forward may well be a good idea.