The UK currency made back losses versus the dollar overnight, helped by weaker than expected US economic data and a bullish tone from BoE member David Miles with regards to UK interest rates. The pound has been as low as 1.4832 only yesterday, but a cent gained in its favour has now seen cable recover to $1.4930. “There is no reason to panic over no inflation at the moment in UK”, Bank of England (BoE) policymaker David Miles told the Financial Times. BoE rate-setter Miles said there are no signs of a downward spiral in prices, despite the current level of inflation rate dropping to zero for the first time ever on record. Miles suggested inflation should begin to pick up toward the end of the year. These comments seem to wipe out recent speculation about a rate cut in the UK, and back towards the next move being a rate rise, leading to a bit of support for sterling. Against the euro, we have continued to see some weakness as the euro recovers some lost ground made over the past month.
The euro continued its recent recovery against the dollar yesterday, with the $1.10 handle being broken in the early morning UK trading session. This was helped by weak US economic data and better than expected German GfK data. German consumer confidence looks set to improve further in April, buoyed by a weak euro and low energy costs. The forward looking GfK index is set to rise to 10.0 from 9.7 last month. The Greek issue seems to be kicked down the road somewhat of late, but this could come back to drag the euro back down as early as the end of the month, as 30th March is the date when liquidity reserves will turn negative in Greece unless some money comes from Europe.
The greenback has continued its recent slide against a recovering single currency and even sterling, as yesterdays weaker than expected US durable goods orders saw traders sell off the dollar in favour of other currencies. The expected figure was a positive 0.3%, but what was printed came in at -0.4%. This saw traders sell off the US currency to the benefit of its major rivals. We have now see EUR/USD break back through the $1.10 handle, a level not seen in 3 weeks. However, it remains to be seen if the pair manages to sustain above that level. On past two occasions the USD was able to make a comeback thereby pushing the pair back below 1.10 levels. The real test would come during the US session in the form of weekly jobless claims data and services PMI data in the US.