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Mixed morning on FX majors


Mixed morning for sterling

We have experienced a bumpy ride so far this morning in the markets- sterling started positively touching 1.6650 against the USD and 1.1380 against the euro; EUR/USD also achieved 1.4647 in early trading. Overnight we had the RICS UK house prices show a rise for the first time in 2 years and then this morning we saw that CPI (Consumer Price Index) data from the UK came in stronger than expected at 0.4% for August. This feedback should have given the markets some assurance that inflation levels are slowly rising in line with the impetus of QE- sterling initially moved higher against the USD and the EUR. As the morning has progressed we have seen German ZEW come in weaker than expected and this has led to a slight sell off in EUR/USD back under 1.46.

However later in the morning Mervyn King swung the markets and sterling into a negative tone. Despite stronger than expected CPI report BOE Governor King feels risks to inflation to the downside. Sterling is sold off across the board after BoE King says he may reduce the interest rate on bank reserves and highlights the long slow road ahead. Sterling has lost over a cent against the USD and is testing the 1.13 level against the euro.

In other news the Reserve Bank of Australia were less hawkish than expected in the minutes of their last interest rate meeting- this has slightly eased the strength of the AUD against the USD back under 0.86. Later today we have US retail sales which volatility is expected and this number should provide more clues to the pace of the recovery in the US.

report by Phil McHugh

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

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