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February 2016

Daily Currency Insight

Published: Wednesday 17 February 2016

  • Sterling benefits from best inflation data in a year
  • USD still boosted by poor commodity prices
  • Fed meeting minutes awaited
Sterling had a better day on Tuesday after UK inflation data showed a rise to 0.3% on the year. That sounds quite pathetic but it is the highest level of inflation for a year; largely due to the way inflation is calculated on a year-on-year basis and the way that energy price falls are now working their way out of the data. Nonetheless, discounting in food and clothing and a fall in air fares have helped to keep the price rises subdued.  Today's UK data is the unemployment report which should show the unemployment rate is down to 5.0%. That would be a very welcome set of numbers for the Pound and the UK government. Sterling may well have a good Wednesday, so if you are a GBP buyer, you may want to take advantage early in the day.
 
This afternoon brings US industrial and manufacturing production along with the minutes of the last Federal Reserve open market committee meeting. I think we are pretty certain of what the Fed is thinking. They are looking in the mirror and wondering why-oh-why did they hike interest rates in December. The chances of another hike this year are minimal and there is even a chance we will see a reversal of the December hike. The Dollar is, nonetheless, going from strength to strength as low commodity prices boost its value and as the rest of the world looks like it is on the verge of going to hell; in a handcart. Perhaps I am overstating things. I must stop reading the red-tops.
 
The Euro seems to have shrugged off the poor German business and investor sentiment. The news reports are all centred on the negotiations between the UK and EU over membership – or not. It has been interesting to see the real concerns being teased out of the EU leaders who are all paying lip service to wanting the UK to remain a member but are clearly very threatened by the dominance of the financial sector that London enjoys. Effectively continued members can be had with some minor variations to the rules but British Banks can't be less-regulated than others and eastern European migrants to the UK must get benefits. That seems to be the size of it. As I said before, I must stop reading the tabloids.
 
That's about it for today. Overnight tonight we get Australian unemployment data and that may well be slightly better than the December data but there's not a lot else to report.
 
Have a great Wednesday and, as I was perusing the tabloids, I noticed that the Daily Mirror is giving us advice to wash our faces in cooler water and not in the shower. Apparently hot water is less good for our delicate facial skin than a cool wash. I need to let my wife know immediately because she has really hot monkey baths. You know the ones that make you go oooh oooh oooh aaah aaah aah as you get in. That can't be good.
 

A useful tip for you

 
You can tell the difference between male and female ants by just using a glass of water.
Drop the ants in one by one and...
 
1) If they sink, Girl-Ant.
2) If they float, Boy-Ant.
 
FX Research by David Johnson

Daily Currency Analysis with Michael Hart

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