UK and US inflation awaited

Today's Highlights

• Sterling recovers some strength

• RBA concern over commodities overlooked as AUD strengthens

• UK and US inflation awaited

FX Market Overview

If Eurozone trade balance figures get you all excited, then Monday was a rip-roaring best day of the month for you. For the rest of us it was a bit ho-hum and the petit movement in exchange rates reflected that apathy. I am overstating it a little because the Pound did recover some of the losses it had suffered in the previous week but there wasn't a lot else going on.

Sterling's mini-recovery related to the changing faces of Bank of England Governor Mark Carney. His policy statements seem to flip flop between delayed interest rate rises and earlier rises and between concerns over the lack of wage growth to 'no worries'. As such, traders aren't sure what to make of the BOE's plans and the Pound is being buffeted. This morning's UK inflation data on both the consumer level and the producer input and output level will affect the Pound. We expect the consumer price index to have dipped again; further delaying the need for BOE interest rate hikes but factory pricing is a leading indicator of sorts, so those figures will be closely watched. Unless the consumer inflation rate is markedly higher; above 2.0% perhaps, the n the Pound has room to weaken.

Overnight news from Australia included the minutes from the last RBA board meeting. They expressed concern over the fall in commodity prices and, if anything, the minutes pointed to further interest rate cuts. However, the Australian Dollar strengthened a tad as no timelines were set for rate cuts.

From New Zealand we heard that inflation expectations have eased to some degree and that eases pressure on the Reserve Bank of New Zealand which has been an early adopter of post-recession interest rate hikes. The NZD stayed in recent ranges after the announcement.

As tension appear to have eased in Ukraine and after the Kurdish successes against ISIS in Iraq, the US Dollar weakened a little as investors ventured out from their USD safe haven. That may continue after this afternoon's release of US inflation data. That is forecast to have dipped a tad and that would reduce the pressure on the Federal Reserve to cut QE budgets. We will also get US housing starts and those figures are expected to be very strong. If so, the USD is set to stay in the $1.67-1.68 area.

And how do you fancy returning from your Honeymoon to find every surface in your home covered in post-it notes? That's what happened to Jamie and Emily Pharro when they got back to their home in Holbeach. Their 'friends' spent 8 hours covering every surface in their house with the little sticky notes and then set up a hidden camera to film their reaction. Check it out online, it is very good. And there is a company stationery cupboard that needs replenishing somewhere in Lincolnshire.