UK inflation drops to a four and a half year low

GBP did alright for itself yesterday on the back of news that UK inflation levels are now sitting at their lowest for four and a half years. This is now being broadly seen as a positive sign of stability in the United Kingdom as this level is below the BoE’s target of 2%. This has given the Bank of England a bit of time within which they will be less likely to look at increasing interest rates in the short term. Today, it is expected that there be a drop in unemployment levels which, if so, will mean further strength for GBP. It is also likely that we see a rise in average weekly earnings from the last quarter.

In Europe, attention was fixed on sentiment data from Germany and Europe – while German figures were slightly under expectations, Eurozone numbers came in a bit better which left markets feeling unperturbed. It’s down to what occurs in the Ukraine now as the country remains a hot spot for Russian meddling. The coming months will be crucial in seeing how the situation is handled and how the Eurozone will become involved. In Spain, the Prime Minister is now looking to have EUR devalued somewhat in an attempt to bolster the Spanish export market and EUR appreciates against its counterparts, particularly the US dollar. Something for investors to keep in mind going forward. Today we will see key CPI figures released – we may see issues arise if the inflation rate continues to fall. We may see the ECB act with some kind of stimulus to weaken EUR if this is the case.

For USD yesterday, we saw the dollar gain against a slew of currencies as tensions in Europe over the Ukrainian crisis deepen and investors looked for a safe-haven. Increased sanctions are now more and more on the cards against Russia with some already in place. With a potential conflict on the cards, any military intervention on Russia’s part would mean a flock towards the dollar. Stateside, we did see USD under a bit of selling pressure as inflation and unemployment were seen to come in below the Federal Reserve’s goals. The Fed’s stimulus efforts up to this point has also been seen to be ‘not as good as they should be’.