the world largest country in the world, had some rumors that their financial sector needs aid just to keep going.
With those rumors diffusing in markets, the Euro tumbled severely as investors decided to dump the higher yielding asset heading toward US dollar because its considered the safest based on the number of plans that were approved to support its movement. The euro plunged to 1.2629 levels for the second consecutive day after recording a high of 1.2825 earlier today.
In addition, the British pound decided to follow the euro because recession is deepening and they still need time for recovery from ongoing bank hesitation and the rising private savings that had curbed the levels of spending. The world's financial sector needs a serious intervention that would restructure the framework just to keep on functioning.
Our calendar today holds some Royal readings; the start will be with the consumer prices that will dip to -1.0% on the month from the previous fall -0.4%, the yearly CPI eased down to 2.7% in January from the previous 3.1%, also the yearly Core CPI inched lower to 1.0% from the previous 1.1% according to market projections.
The inflation report, which was released out last week, cleared that inflationary pressures will undershoot the Bank of England targets affected by the sharp fall in demand levels and the lost confidence. The report mentioned that CPI would be heading under the 2% comfort zone in the medium term, justifying these easing prices by the falling crude prices, which fell dramatically from the unprecedented levels that were recorded in the prior year.
Crude Prices fell heavily from a high of $147.28 per barrel, reaching to the current levels in less than six months; currently the black gold is trading at $36.61 per barrel falling for the second consecutive day. This dramatic fall was not favorable by all economies even after they were hammered by the surging prices previously. In the preceding year, OPEC decided to trim their production twice as their wealth was curbed heavily especially they enjoyed the old extremely high levels.
The second reason the bank used was the impermanent VAT cut that dragged inflationary pressures back into the comfortable levels with some projections prices would continue heading down threatening the Royal lands with Deflation!
The Sterling pound fell for the third consecutive day recording a low of 1.4125 earlier today after recording a high of 1.4201 levels where now the pair is currently trading at 1.4134 levels. The pound might be heading down south if inflationary and retail price index comes worse than markets anticipations, clearing out that the central bank must start using unconventional methods in order to bolster their economy preventing it from deflation.
Even when the US markets was off yesterday enjoying the President Day, the USD/JPY inclined to currently trade at 92.35 levels, its evident now that the US dollar will be the most safe currency between rivals because the ongoing Credit Crisis is having a bigger effect on other markets after it totally destructed the US markets.
The endless interventions from the US government is finally making a good job in spreading back some tranquility in the US markets, yet more elaborations needed from the US new President on how they will start implementing the approved plans in order to rescue banks balance sheets and stop the endless fall in house prices.
In our calendar, we have the Empire Manufacturing, which is a gauge to the levels of manufacturing activity in the United States, according to markets projections the manufacturing will continue to struggle with minus levels where it plunged to -23.75 levels from the previous -22.20. In addition, we have the net long-term TIC flows with expectations that had inclined in December from the prior -21.7 billion and the previous 20.0 levels.
Therefore, my dear reader let's just see what would the British inflationary data will revel to us today and if the threat of deflation will increase or not...