Pound Dollar Exchange Rate Could Rise Following Chinese CPI Data, Sterling Investors Nervously Await Tomorrow?s UK CPI Figures

October 15, 2012 - Written by John Cameron

STORY LINK Pound Dollar Exchange Rate Could Rise Following Chinese CPI Data, Sterling Investors Nervously Await Tomorrow?s UK CPI Figures

The major development in the global markets during the overnight session has been the release of the latest Chinese CPI Inflation figures. Tellingly, the September numbers revealed that the rate of domestic price rises in China had dipped from 2.0% in August to 1.9% last month, suggesting that persistent price pressures in the giant Asian economy are coming well under control. Only a few months ago, Chinese administrators had been fearful that spiralling food prices were set to wreak havoc amongst the country’s population. However, the overnight release reveals that China’s price rises are accelerating at a far lower pace than those of the UK and several other major global economies. Significantly, the dip in Chinese price rises opens the door for Chinese policymakers to further relax monetary policy in the near-term. The potential for such a move has seen global stock markets open up on the front foot, with London’s FTSE 100 trading up by a quarter of a percentage point in early trading. The re-emergence of ‘risk-on’ trading means that the US Dollar may come under selling pressure later today, so further upside for the GBP USD exchange rate would appear a pronounced possibility.

Meanwhile, the UK’s headline CPI inflation figures are due for release tomorrow morning. They are anticipated to show a marked drop-off in British price inflation from 2.5% in August to 2.2% last month. The price rise / monetary policy set-up for the UK is similar to that of China. Analysts believe that a dip in inflation could precipitate more Quantitative Easing from the Bank of England sooner rather than later, or alternatively a trimming of the BoE Base Rate early next year. A showing of anywhere south of the expected 2.2% level for tomorrow’s British inflation figures would see the market factor-in a high likelihood of such an outcome, sending Sterling lower across the board.

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 Daily Currency Updates Dollar Po Forecasts