The pound is mixed this morning, consolidating against the euro, but gaining against the US dollar before the release of the producer prices data today at 9:30. The PPI gauge is expected to rise by 2.1% in March after an 1.1% increase in the month before. However, sterling came under pressure against the euro yesterday after the Bank of England kept the interest rates unchanged at 0.5%, while the European Central Bank increased its main refinancing rate to 1.25% for the first time since 2009. Separately, Chancellor George Osborne speaking at the BCC (British Chamber of Commerce) conference said that UK could face a sovereign debt crisis, just like Portugal, if the business and unions do not back his austerity measures. Expect for the pound to remain in current ranges against the major rivals for the reminder of the week ahead of the inflation data release scheduled for Tuesday.
The euro gained across the board this morning after a report showed that German exports grew more than previously expected, adding to evidence that Europe’s largest economy is expanding at optimistic pace. The report showed that exports climbed 2.7% in February from a month earlier, when they fell 1%. The single currency strengthened yesterday after ECB raised its key interest rate to 1.25% to detain the inflation and Mr. Trichet left the door open for further increases this year. Expect for the euro to remain supported against the major’s as European Central Bank tightens its monetary policy.
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