Sterling had a good day yesterday versus many currencies and gained a further 1% versus the Euro. The UK CPI rose 0.6& in December 2009 and this was up by 0.3% the previous month. The market had expected CPI to hold steady at 0.3%. This was the third month in succession that CPI increased.
The core CPI, which excludes energy and other goods with volatile prices, grew 2.8% in annual terms, up from 1.9% in the previous month. The market had predicted a climb to 2.3%.
The UK’s retail price index for December increased 2.4%, up from 0.3% in November and bettering markets expectations of a rise of 2.2%, and this increase is the highest in 21 years.
These figures have added to hopes of a continued economic recovery.
In Europe, expectations for the German economy have fallen for the fourth month in a row.
According to the economic research institute , ZEW , the economic expectations fell from 47.2 points to 57.7 in December. This was much lower than economists had forecast and was the lowest reading since July.
The survey would suggest that the German economy is struggling to maintain the momentum it regained in the second and third quarters of last year and this will put pressure on the Euro.
Consumer demand is down, unemployment is up , wages are down thanks to reduced hours and all in all the outlook is not too healthy.
ZEW noted a “considerable” improvement in the outlook for the country’s vital engineering sector, but said it expects the automobile sector and consumption both to weaken in the next six months.
Although the car sector saw growth last year this was mainly down to government stimulus of €5 billion for scrapping older vehicles. As the stimulus has now finished, auto sales are predicted to fall.
Quote of the day? “The way out of the recession is burdensome and long,” ZEW President Wolfgang Franz who is also chairman of the government’s council of economic experts.
In the US , the consumer comfort index shed two points to -49 in the week ended Jan. 17. The index is now at its lowest level since Nov. 1, 2009. According to an ABC poll , confidence fell last week.
Yesterday’s rates
GBP/EUR 1.1354 – 1.1474
GBP/USD 1.6314 – 1.6456
EUR/USD 1.4253 – 1.4413
This morning’s rates
GBP/EUR 1.1456
GBP/USD 1.6267
EUR/USD 1.4197
Economic data 20th January
GER : 07.00 PPI (December)
ITL : 09.00 Industrial Orders (November)
UK : 09.30 BoE Minutes of 6th/7th January MPC Meeting
UK : 09.30 Average Earnings (3 Mths to November)
UK : 09.30 Claimant Count Unemployment (December)
- ILO Unemployment Rate (November)
US : 13.30 Housing Starts (December)
US : 13.30 PPI (December)
- Ex Food & Energy
