Sterling strengthens ahead of inflation announcement

Enrique Díaz-Álvarez14/Apr/2015Currency Updates


The Pound rose marginally against the Dollar as markets opened for the week on Monday, although traded mostly within a narrow band to finish the session 0.45% higher.

A muted start to the week in the UK as far as economic data was concerned with no major releases and limited volatility. Politics dominated the headlines once again. With just over three weeks until the General Election in the UK an ICM poll yielded a surprise result, placing David Cameron’s Conservative’s six points ahead of Labour at 39% to 33%. Average polls continue to show the two major parties are neck and neck in terms of percentage support, but so far markets are taking the uncertainty in their stride. Elsewhere, a survey of business attitudes shows that more than 8 in 10 business leaders in Europe want the UK to stay in the EU.

Today looks set to be a far more eventful day in the UK with a number of releases likely to cause Sterling volatility. Britain could fall into deflation for the first time in more than half a century this morning as National Statistics releases its monthly consumer price index for March. While forecasts expect price growth to remain stable for the second consecutive month, a fall to negative levels would mark the first time Britain has experienced deflation since as far back as 1960.


The Euro fell to its weakest position against the Dollar in almost a month on Monday, finishing London trading 0.2% lower.

The little data that there was came in mostly mixed yesterday. Industrial production in Italy climbed by 0.6% in February, in an encouraging sign that Europe’s third largest economy will emerge from three years of recession. However it bears noting that Italian industrial production still declined on an annualised basis by 0.2%. France’s current account deficit also widened in February to 1.8 billion Euros from 0.3 billion Euros a month previous. In other news, Athens yesterday denied reports that Greece was set for a snap election should the country fail to secure a bail-out extension with its creditors.

Industrial production data at 10am London time in the Eurozone today is the only major release as far as data is concerned. The main focus of the week in Europe will be on Wednesday with the European Central Bank’s interest rate decision and press conference.


The greenback continued to strengthen yesterday following last week’s strong performance. The Dollar index touched close to a four week high to finish 0.15% higher.

Data in the US was in short supply on Monday. The monthly budget statement, however, showed the budget deficit in the US increased by 43% on this time last year to $53 billion. Receipts last month totalled $234 billion, up 8% from a year ago, while outlays were $287 billion, up 14% over the course of twelve months. However, all these numbers are highly volatile on a month to month basis and therefore it is difficult to extract meaningful conclusions from them.

Today’s retail sales data at 1:30pm GMT takes on added importance this month following three consecutive months of weakness. A strong reading would suggest the recent slowdown in US performance was temporary, after the Northeast suffered its coldest winter since records began 120 years ago.

Rest of the world

There was some surprisingly bad trade data from China yesterday, heightening concerns of a slowdown in the world’s second largest economy. China’s exports fell by 15% last month, while imports declined at their fastest rate since the financial crisis. The monthly trade surplus is now at its lowest level in thirteen months. Consequently the Australian Dollar, whose economy relies heavily on Chinese trade, plummeted by 1.3%.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.