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King signs off with optimism

Currencies Direct May 16th 2013 - 2 minute read

Mervyn King has signed out with an
upbeat final quarterly inflation report with growth forecasts
increased and inflation forecasts scaled down.  King expects
to see unemployment gradually come down which backs up the official
data today which showed unemployment levels falling.  The big
positive is the expectation that growth expectations are looking
rosier and at the same time inflation is softening, previously it
has been the other way around.  The report is good news for
consumers that have been hit with persistently high inflation and
no end in sight for a return to growth.

Although the report gave a short
term boost to the pound on the upbeat growth forecasts, this was
short lived as overall we expect the pound to fall in line with a
more aggressive Bank Of England as Mark Carney replaces Mervyn King
as Governor. The sparks of life are now evident but until we see
the UK economy truly fire into life we can expect the Bank Of
England to be proactive and more aggressive which is likely to
weaken the pound.

In other news Japanese preliminary
GDP beat estimates and this help to continue the positive risk
sentiment in Asia until it was dampened by weaker Japanese earning
reports.  In the currency markets the Euro came under renewed
pressure against the USD as speculation increases for a further
rate cut from the ECB following yesterday’s disappointing Q1 GDP
data.   In addition the USD is making gains after hints
that the Fed is moving closer to exiting their QE

The focus for today will be on Euro
area inflation especially in the light of an anticipated rate
cut.  We also have inflation data from the US and initial
jobless claims and the Philadelphia Fed survey.  Economic data
from the US has been mixed but leaning towards the upside and it is
hoped that this trend will continue, if so this will support a
stronger USD.

Written by
Currencies Direct

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