The pound consolidated against the dollar, but gained versus the euro as debt crisis in the euro-region continue to weight on the single currency. However, sterling came under pressure against the dollar during the overnight trade before we receive consumer price inflation (CPI) data for October. Market consensus is calling the CPI inflation to have fallen to 5.1% from 5.2% in the previous month, although the RPI inflation is projected to edge up to 5.5%. British economy is slowly entering the stagnation faze, with inflation figures reaching record high, while economic growth continue to falter. According to the OECD (Organization for Economic Co-operation and Development) the UK economic outlook has worsened for seventh straight month, mainly due to the Eurozone debt crisis, but also as other major economies have been experiencing economic slowdown. Expect for the pound to remain in current levels against the euro as investors run for safety of the UK currency after Italian and Spanish bond yields advanced.
The euro declined across the board during the early morning session before Germany releases its investor confidence survey today at 10:00. The ZEW Investor Confidence survey (which aims to predict developments six month in advance), is expected to report that index of investors expectations declined to minus 52.5 this month from minus 48.3 in October, the lowest since November 2008. The single currency also came under pressure as Spanish bond yields advanced before offering bonds maturing on 2022 and ahead of the country’s general election on November 20.
The dollar gained against its major rivals during the Asian session as investors run for safety of the US currency amid market risk aversion. However, the gains in the greenback were limited on increased speculation the Federal Reserve will refrain from reducing liquidity in the economy to accelerate recovery through lower borrowing costs. Looking ahead to today, retail sales data headline the economic calendar with the expectations for the figures to have dropped in October. Market participants believe that the pace of economic recovery in the US is not strong enough to encourage the Fed to continue with monetary easing.
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