Investors Await European CPI Inflation Data, GBP EUR Exchange Rate At Risk Again

Published: Thursday, 28 February 2013 09:00 BST - Written by Minesh Chaudhari

STORY LINK Investors Await European CPI Inflation Data, GBP EUR Exchange Rate At Risk Again

Yesterday afternoon’s US Durable Goods Orders data for last month showed a sharp drop from December’s print, and the rate of interest paid by Italy on her 10 year gilts spiralled at yesterday’s auction, yet Tokyo’s benchmark Nikkei 225 index still climbed by over 2.5% during last night’s Asian session.

The forward move in appetite for risk in Japan, which was mirrored by share movements in Sydney and Hong Kong’s share indices last night, was largely due to the release of encouraging Japanese Industrial Production data, published after yesterday’s New York close. The figure revealed that the output of Japan’s combined industries had increased by 1% last month alone. This was the second monthly increase on the trot, suggesting that the nation’s policy of aggressively weakening the Yen is having the desired effect. The figure was marginally below analysts’ expectations, however the fact that investors were willing to put concerns over Italy’s debt costs and yesterday’s poor US data to the back of their minds following the Japanese release hints at growing confidence in the state of Asia’s second largest economy.

Today’s session brings a packed day for global data releases, with Q4 GDP numbers from Switzerland and the USA leading the way. Market participants will be afforded further clues regarding the future direction of the European Central Bank’s monetary policy when whole of eurozone and German CPI inflation figures are released later on. A showing of above the anticipated annualised levels of 2.0% and 1.7% respectively could cause investors to trim their bets on the likelihood of another near-term ECB interest rate cut. Such an outcome would send the Pound euro exchange rate (currency : GBP EUR) down towards Monday’s 16-month low once more.

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