BOE happy inflation is correcting

The governor of the Bank of England, Andrew Bailey has stated that UK inflation is starting to correct. He said recent figures are good news and reflect the unwinding of external inflationary pressures. Whether that is an admission that the bank’s punitive interest rate policies had nothing to do with it, I don’t know. Either way, with growth returning to UK manufacturing for the first time in 4 months, sterling is holding up well, making gains throughout last week against the US dollar and against the euro. The gains further afield have been limited to the Canadian dollar. Both the Aussie and the Kiwi dollars are being supported by a weaker US dollar. We start the week with the pound buying USD 1.2620 and EUR 1.1525 in the interbank market. Whilst the trend seems to be upward for the pound, we lack significant UK data this week. So sterling will take its cues from overseas developments.

NZ has new government but probably no interest rate change

New Zealand has formed a coalition government, which many commentators believe will offer slightly less expensive policies than the leading party campaigned on but being at the end of an election battle is always a good thing for stability in the economy. We will also most likely see stable interest rates this week when the Reserve Bank of New Zealand meets. Whilst the Kiwi economy is struggling, of that there is little doubt, the RBNZ doesn’t look ready for interest rate cuts just yet. Weakness in the US dollar which directly impacts the value of NZ exports, has allowed for some strength in the Kiwi dollar over the last week. The GBP/NZD rate is fairly stable at NZD 2.0725. That is slap bang in the middle of the range of the last month but it would be lower if sterling was not finding its own support.