The Pound made gains against the Euro and Dollar after inflation data came in slightly higher than expected, though the gains were minimal ahead of the economic and political concerns of the upcoming general election. A quarterly survey from the Bank of England showed Britain’s expectations for inflation over the next 12 months rose to 2.5% in February.
The Dollar declined against the Pound and the Euro after weaker than expected economic data. The Commerce Department said the nation’s trade gap shrank 6.6% to $37.3 billion in January as oil imports fell to their lowest since February 1999. Data from the Labour Department indicated initial claims for state unemployment benefits slipped 6,000 to 462,000 last week. Also weighing on the dollar were comments from Standards and Poor’s stating that though the dollar is still the most important world currency, rising levels of US debt and dependence on foreigners to finance much of this debt may pose risks to the currencies primacy. Without a credible plan to rein in fiscal spending, external creditors could reduce dollar holdings which keeps government borrowing costs low, and ultimately put pressure on the US’s “AAA” credit rating.
The Euro made small gains against the Dollar while declining against the Pound as investor’s appetite for risk alternates. European Union policymakers injected a cold dose of reality into talk of creating a European monetary fund, stating the principle of no bailouts for countries in financial trouble must stay. Euro group Chairman Jean-Claude Juncker said that such a fund should protect only the interests of the entire Eurozone and not any individual member of the currency bloc. ECB governing Council member Yves Mersch said central banks were not in the business of budget bailouts.
Exchange rates
GBP/EUR 1.1005
GBP/USD 1.5110
EUR/USD 1.3726
GBP/AED 5.548
Data released 12th March 2010
EU 10.00 Industrial Production (January)
US 13.30 Retail Sales (February)
Ex Autos
US 14.55 Michigan Sentiment (March prelim)
US 15.00 Business Inventories (January)
