Those of you who take the time to read these update on a daily basis will be aware that the FX markets are full of various intricacies and nuances which lead it to be rather contradictory at the best of times. Today is one such occasion.
As we await today’s CPI figures from the UK, the markets are expecting the inflation rate to slow to 1.8%, down from June’s 1.9% and below the magical 2.0% figure. It would be expected that Sterling should then decline. However, is it all that simple? This figure could well have already been priced into the markets and may well be slightly ignored, as Mark Carney has already said that wage inflation should not be the only focus for the market rate expectations.
We also have seen 6 weeks of losses from the British Pound, which has signalled the longest losing run in 4 years. Some see this as coming to an end sooner rather than later as geopolitical risk appears to be hopefully subsiding and risk appears to be returning slightly to the markets.
Can we trust it?
It's always good to see what others are predicting and, currently, most analysts are seeing GBP being oversold and are expecting the Pound to make a storming recovery and head back to where it came from against the Dollar especially. The great thing about analysts is that tomorrow they are just as likely to say the reverse!
Main news out is the UK CPI, with the US CPI and US housing starts coming out this afternoon.
Posted in Daily Market News on Aug 19 2014