German Inflation Data Shows Slight Dip, Sterling Euro Exchange Rate Remains Steady

Published: Wednesday, 28 November 2012 15:00 BST - Written by Ben Hughes

STORY LINK German Inflation Data Shows Slight Dip, Sterling Euro Exchange Rate Remains Steady

A flat day in the markets today has been summed up by this afternoon’s centrepiece data release; the latest German CPI Inflation data for this month came in exactly as per expectations at an annualised 1.9%. This was marginally down from October’s counterpart figure of 2.0%. The fact that persistent price rises appear to be easing in the eurozone’s dominant economy suggests that the European Central Bank may have the scope to trim interest rates from their current level of 0.75%. A cut to 0.50% may now be on the cards for the early part of next year. The anticipation of such a move from the ECB could potentially hold back the single currency for the remainder of 2012, however the instant effect of the news was negligible, with the GBP EUR exchange rate holding in the higher part of the 1.2300s.

Elsewhere, the US Treasury has delivered its verdict on China’s internal monetary policy. The American finance department has announced, following thorough investigations, that the most significant economic power in Asia ‘is not a currency manipulator’. However, the US Treasury team somewhat confusingly went on to observe that the Yuan is ‘significantly overvalued’. The news acts as an illustration of the precarious nature of Washington’s relationship with Beijing; the US wants to keep China ‘onside’ due to the increasing importance which she is expected to have on global geo-political events. However, America remains more than mildly suspicious of the former hardline communist state. Any flare up in Sino-US relations would be likely to see institutional investors scramble for the shelter of the safe-haven US Dollar, sending the GBP USD exchange rate sharply lower.

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