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UK CPI came in at 3.1% against the expectation of 3.2% so slightly lower than expected. However the year on year rate is +3.5% and will require a letter of explanation from Mervyn King to Alistair Darling to explain why. King has regularly banged the drum that inflation will come down as we move through 2010 and today’s data to a small extent justifies his forecasts. However the data did not move the FX markets which have been quiet today considering the amount of market feedback. What the data does assist with is the BoE continuing with their policy of low interest rates and leaving the door open for further QE if deemed necessary.
Today European finance ministers are meeting again concerning Greece- feedback so far again is largely talk with no real details of the fundamentals of how assistance will be delivered. The ongoing situation is leaving the markets flat as risk is held off the table until further clarity is divulged. We have seen a further expansion in the credit default rates today for Greece reflecting the lack of clarity.
Economic data today from Germany in the form of the ZEW came in slightly better than expected and the survey is expecting a prolonged and slow recovery- again no change to the markets with EUR/USD sitting at 1.3650.
Discuss on this on the Currency Exchange Forum
February 17, 2010 @ 9:32 am
[...] UK CPI prompts another letter from Mervyn UK CPI came in at 3.1% against the expectation of 3.2% so slightly lower than expected. However the year on year rate is +3.5% and will require a letter of explanation from Mervyn King to Alistair Darling to explain why. King has regularly banged the drum that inflation will come down as we move through [...] [...]