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Posted July 17th, 2013 by Charles Purdy

A difficult day for sterling lies ahead | Smart Daily Currency Note

GBP/USD – 1.5092

Consumer Price Index data from the UK, which gives an indication as to the current level of inflation, came in marginally worse than expected yesterday. This impacted on sterling’s performance as traders hedged their bets in the run up to the today’s publication of the minutes from Governor Mark Carney’s inaugural Monetary Policy Committee (MPC) meeting. Inflation has an important impact on performance as higher inflation should deter the MPC from further quantitative easing, which would devalue the currency, whilst lower inflation data would be seen as giving decision makers the go-ahead for increased asset-buying. The sterling dollar rate fluctuated throughout the day as both currencies reacted to negative stimuli, whilst sterling weakened steadily against the euro throughout the day. All eyes will be on the Bank of England report released this morning as we wait to see which way Carney and the other members voted on further quantitative easing. Call in now to track market reaction to the minutes and to get a live rate.

The US dollar struggled yesterday as speculation grew that Chairman of the Federal Reserve Ben Bernanke will continue to deter hopes that we can expect a speedy scaling back of US bond-buying when he delivers his monetary policy report to Congress over the course of today and tomorrow. His words last week made traders hesitant to back the dollar ahead of the report. The US dollar fell consistently against the euro, whilst the dollar sterling rate experienced volatility, with sharp movements in both directions as both currencies struggled. US Consumer Price Index data, a key inflation indicator, failed to have a significant impact as predictions proved to be largely accurate for the month of June at 0.2%. Whilst the Chairman of the Federal Reserve’s report to Congress is expected to steal the headlines across the Atlantic, we also have another member of the Federal Open Market Committee speaking as well as a the release of the Beige book which will reveal the state of the local economies from all 12 Federal Reserve Banks. Call in now to see how the report is received.

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