Tuesday August 12, 2008 - 10:35:58 GMT
Share This Story
FXCM - www.dailyfx.com
Forex Research - Pound Finds Support At 1.8970 As CPI Rises To Highest On Record
â€˘ Japanese Yen: Finds Support Below 110
â€˘ Euro: Bounces From 1.4820
â€˘ British Pound: Inflation Rises To Highest On Record
â€˘ US Dollar: Trade Balance on tap
Pound failed to break below the 1.8970 price level twice during the
overnight session, finding support each time. Surprisingly the second
test cam after U.K. inflation data printed hotter than expected at 4.2%
against 4.0%. It was the highest level since 1997 and a 0.6% increase
from Juneâ€™s 3.8% reading. The main driver was an 12.3% increase in food
prices, which signals that despite the recent decline in Oil, inflation
pressures will continue to exist.
Indeed, core prices also rose 1.9%from 1.6% the month prior as price
pressure spreads throughout the economy. BoE Governor King has
previously stated that he expects inflation to remain their 3%
threshold for several quarters, which will require him to write another
letter of explanation at the end of the quarter to Chancellor Darling.
Tomorrowâ€™s quarterly inflation report will give us further insight into
the central bankâ€™s outlook and possible signs of future monetary policy
bias. The MPC left rates unchanged and their last meeting and we will
have to wait until August 20th to see the vote tally. Therefore,
tomorrowâ€™s comments could present major event risk for the Sterling.
The Euro bounced off of support at 1.4815 climbing back above 1.4900.
The pair has continued to trade lower as the outlook for the European
economy grows dimmer. The French current account deficit widened to
-4.4 billion from a revised -2.8 billion, as a strong Euro continues to
weigh on demand for exports. Meanwhile, domestic growth continues to
weaken as consumerâ€™s struggle with high credit costs and rising
inflation. President Trichetâ€™s recognizing the softening of the economy
has continued to weigh on the Euro despite hawkish comments from Klaus
Liebscher. Indeed, Thursdayâ€™s GDP reading is expected to show that
growth in the second quarter contracted which could lead to traders
pricing in a rate cut as soon as early 2009.
The upcoming U.S. trade Balance report is expected to show the deficit
widening, which is most likely due to a decrease in exports. The rest
of the world has caught the U.S.â€™s cold and their slowing growth will
continue to weigh on demand. The release could highlight concerns that
if the on area of growth for the U.S. economy begins to weaken and the
slack isnâ€™t taken up domestically, the economy may sink further, which
could weigh on the dollar today. Yet, with oil prices threatening to
fall below $113 a barrel and gold falling to a seven month low, we could see the dollar strengthen further.
Has the EUR/USD Peaked? Join us in EURUSD Forum
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."