Volatility Forecast for British Pound Sterling (currency:GBP) on CPI Inflation Data

April 14, 2015 - Written by John Cameron

STORY LINK Volatility Forecast for British Pound Sterling (currency:GBP) on CPI Inflation Data

Friday’s figures from Commodity Futures Trading Commission (CFTC) revealed that the number of speculators betting that the US Dollar (currency:USD) will strengthen in the short term had slightly decreased at the last count.

The figures, which covered the week ending 7th April, showed that a net total of $40.27bn worth of net Dollar long contracts were being held as opposed to $40.37 the previous week. It should be noted that the minutes of the March US Federal Reserve policy meeting, which most commentators judged to be surprisingly hawkish, were published on 8th April, the day after the period covered by the CFTC ended. Analysts surmise from this fact that the next CFTC data will point to a renewed surge in demand for Dollar contracts.

The CFTC numbers also pointed to an improvement in sentiment towards the euro (currency:EUR) following the publication of several data sets suggesting that the European Central Bank’s Quantitative Easing programme is beginning to have its desired effect. However, the historical nature of the CFTC data means that, following comments describing the eurogroup of Finance Ministers as being ‘shocked’ at Greece’s failure to produce a concrete list of economic reforms at last week’s Brussels meeting, the next set of data on speculative positions may point to a fresh anti-euro move.

Looking ahead, the main event for today’s session comes in the UK with the publication of March’s Consumer Price Index data. Opinion amongst analysts is split regarding the likely outcome of the key inflation numbers. Some commentators believe that the headline year-on-year number will show at below zero per cent, confirming that the British economy has fallen into deflation. Such a result would trigger broad selling pressure on the Pound as investors rapidly move to factor-in a lower percentage chance of a Bank of England interest rate increase in the short-to-medium term. Others suggest that a result of just above 0.0% is the most likely result. The Pound would strengthen in such an event. Either way, today promises to be a highly volatile session for Sterling.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Currency Predictions Dollar Poun Forecasts