Foreign Exchange Report : GBP USD Rate Drops as Global Risk Appetite Wanes, This Morning?s UK CPI Inflation Data Could Cause Further Downside

Published: Tuesday, 18 October 2011 09:04 BST - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP USD Rate Drops as Global Risk Appetite Wanes, This Morning?s UK CPI Inflation Data Could Cause Further Downside

The Pound Euro exchange rate (GBP EUR) is 1.1504. The Pound Dollar exchange rate (GBP USD) is 1.5767. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5537.

The US Dollar broke its recent run of losses during yesterday’s trading session, to register a significant gain against the other majors for the first time in ten days.

On a light day for data, support for the Greenback was largely caused by the continued procrastination of Eurozone policy-makers regarding the ongoing sovereign debt crisis in the region. These concerns were fuelled by comments from the German Chancellor Angela Merkel’s spokesman, casting doubt on the timing of the expected European debt plan. Analysts had expected a detailed policy announcement from Europe’s leaders by the end of this week, following last week’s G20 Finance Ministers’ summit. However, Merkel’s spokesman poured cold water on these expectations, stating that the debt plan may take longer to formulate.

As ever, the markets did not react well to Europe’s inaction. This was reflected in a day of losses for global stock markets. These losses have continued into today’s session, with London’s FTSE 100 opening over 1% down on the day. The dip in global appetite for risk was reflected in support for the Dollar, taking the GBP USD rate from a daily high of 1.5848 to trade as low as 1.5730 at one point during yesterday’s afternoon session.

Looking ahead, today sees the release of the key ZEW Economic Sentiment survey in Germany. Investors holding Euro-denominated assets will be hoping for an improvement on last month’s -43.3 reading in order to stem the Euro’s losses of yesterday.

This morning’s headline UK CPI Inflation data for September, will also be closely-watched. Analysts expect the figure to show that UK prices are rising at an annualised rate of almost 5%. Any less than this reading could cause renewed downside for the Pound.


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