Sterling rises ahead of the Quarterly Inflation Report

  • The euro rose today after the troubled German bank, WestLB, reached a restructuring plan which relieved the markets. Economic data on Tuesday revealed a mixed view after euro zone and Germany's Gross Domestic Product did not meet expectations while ZEW survey revealed a positive note. Euro zone policymakers decided to increase the European Financial Stability Facility to 500B from 250B but the euro still remains vulnerable to decisions taken regarding the euro zone debt crisis. The euro jumped as high as 1.3569 from 1.3459 against the dollar.
  • The dollar appears weaker today after retail sales data gained 0.3% disappointing investors who were expecting a 0.5% rise. Equities closed negative and US Treasury yields fell, further weighing on the dollar. FOMC minutes are anticipated later today and speculators expect comments on an improved labor sector and higher inflation.
  • Sterling rallied after Consumer Price Index data showed inflation in the UK increased to 4% while the Bank of England's target is only at 2%. Further supporting the sterling was a letter by Mervyn King to Chancellor George Osborne emphasizing on the need to adjust the central bank's policy in order to bring inflation back to comfortable levels. Heightened expectations of an early rate hike pushed the sterling as high as 1.6168 versus the dollar from 1.6006. Focus now turns to the unemployment data and Quarterly Inflation Report released today at 9:30 GMT.
  • Against the Japanese Yen, the dollar edged higher helped by a rise in US Treasury yields. The pair hit an eight-week high rising as high as 83.90 from 83.19. 
  • Gold ticked higher rising as high as 1376.53 dollars an ounce from 1361.18 after the high inflation figure in the UK.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3465 with a preference to enter into Long positions at 1.3475
  • § The USDJPY pivot point is at 83.45 with a preference to enter Long positions at 83.50              

Today's calendar and market movers:

  • § UK ILO Unemployment Rate in December is forecasted to remain unchanged at 7.9%
  • § US Producer Price Index in January is forecasted to gain 0.9%
  • § US Industrial Production in January is forecasted to gain 0.7%

Equity Markets:

US equities were mixed on Tuesday with the S&P500 trading down -0.32% and the DJIA unchanged. The European bourses are mixed with the FTSE trading down -0.38%, the DAX trading up 0.05% and the CAC up 0.33%. The NIKKEI and the HSI at the time of writing are trading up 0.57% and up 0.82% respectively.

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