Pound Strong on Euro As Inflation Increases

By TraderVox.com

Tradervox (Dublin) – The National Statistics released its Consumer Price Index report today showing that inflation increased as expected. The CPI measures price movements through comparison of retail prices of representative shopping basket of goods and services. CPI is an indication of inflation and changes in purchasing trend where a high is seen as positive for the sterling pound and a low reading is negative.

The report released today showed an increase to 3.5 percent from 3.4 percent registered last month. This is in line with economists’ prediction and it led to a stronger pound against the euro. The GBP/USD cross climbed higher in anticipation of the report and remained high after the report was released. The Retail Price Index (RPI) declined to 3.6 percent as expected from 3.7 percent registered last month. In addition, the DCLG HPI rose as expected by 0.3 percent.

Before the report, the pound increased against the dollar to trade at 1.59 after it had fallen to 1.5820 yesterday. The pound rallied from 1.5860 to appreciate by 0.3 percent to $1.5949. It was also strong on the on the yen climbing 0.7 percent to trade at 128.69 yen. Against the euro, the Great Britain Pound rose by 0.4 percent to exchange at 82.34 pence per euro.

The sterling has been performing very well for the last one month increasing by 0.9 percent. It has been the second best performer among the ten top currencies in the world. According to David Bloom, inflation has been sticky across the board and he advises that the current increase in the UK inflation presents a good opportunity to sell into it.

The concerns in about the European debt crisis has caused investors to look for relative safe haven assets in the UK government debt hence causing gilts to decline for the first time in three days. The German bonds after Spain raised more than its target in a bill sale. Positive reports from UK have eased speculation of another round of asset purchases by the Bank of England.

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