Currency Update – UK CPI

The Pound has strengthened this morning (20/04) following higher than expected UK inflation data. The official measure of inflation known as the Consumer Price Index (CPI) beat market expectations coming in at 3.4% year on year. As inflation remains above target it means it is more likely that at some point the Bank of England will have to start reversing its programme of Quantitative Easing and increase interest rates which have been held at a historic low of 0.5% since March 2009.

However, the timing of any changes in monetary policy remains highly uncertain as it is likely the Bank of England will want to further secure the UK’s economic recovery from recession before we see any monetary tightening. 

The deemed threat of a hung parliament following a further narrowing in the opinion polls also adds to the uncertainty around the future direction of the Pound.

Elsewhere, the cost of Greek debt continues to climb and is putting increased pressure on the Euro. The interest rate charged by investors for ten year Greek bonds hit 7.6%, the highest level since the Euro was introduced. Germany, viewed as the safest European economy is only charged at 3%.

The financial markets will now await the outcome of the next meeting in Athens, now due on Wednesday following the disruption to flights, between officials to agree the terms of the joint European and IMF rescue package. Full details of the plan, including the rate of interest have yet to be finalised.

The following rates are shown for indicative purposes only. Please note the rate you are able to achieve will depend on the amount of currency being purchased.

 EURUSD: 1.35 

GBPEUR: 1.14

GBPUSD: 1.53

If you would like to discuss any upcoming foreign exchange requirements, please do not hesitate to contact the dealing team on 01695 581 669.