In April the ONS reading for CPI was that UK prices had gone down (deflation). In the height of the recession inflation peaked at over 5%, significantly above the Bank of England’s 2% target. The governor at the time, Mervyn King would write a letter to the Chancellor explaining why inflation was overshooting the central banks remit. With inflation high and asset prices appreciating, some analysts believed that interest rates would need to be increased from the record low of 0.50%. The…

Overnight the Bank of Japan Governor Kurodo said that “the Yen may not weaken much further on real effective exchange rate basis”. The comments led to an immediate strengthening in Yen crosses, as traders interpreted the comments; that the BoJ will not be easing further in the near future. USDJPY session high was 124.65, following Kurodo’s comments the currency pair to session lows of 1.2245. The governors comments were retracted by a Japanese official, in what has be…

The Markit / CIPS UK Services PMI missed analysts’ expectations; the reading was 56.5 in May compared with a strong figure of 59.6 in April. The release for May was the ninth consecutive month above 50.0, signifying expansion. The Services PMI figure followed Tuesday’s Manufacturing PMI release that also missed the analyst consensus. The Markit release highlighted that the outcome of the UK election had reduced business uncertainty. A key point that the market seems to have…

In the FX markets Sterling (GBP) weakened against the other major currencies as the Markit / CIPS UK Manufacturing PMI missed expectations. The release from Markit showed manufacturing output had expanded in May, with the index at 52.0 compared to the revised April figure of 51.8. Manufacturing is only a small component of the overall UK GDP, with services being the major contributor to the economy. Following the release Sterling was offered against the US Dollar, trading to down below…

On Tuesday indices in Europe and the US were weak after the long weekend, with the USD bid across the board, commodities were softer. During Wednesday morning’s session, the US dollar has pulled back from Tuesdays highs against the majors; EURUSD: 1.0920 GBPUSD: 1.5422 USDJPY: 123.00 The strong data from the US on Tuesday reminded traders that that the “data dependent rate hike” from the Fed, might not be as far off as had been expected. Openin…

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At the meeting the committee voted to leave interest rates and asset purchases (QE) unchanged at 0.50% and £375bn. Today’s release of the Minutes of MPC meeting 7 and 8 May 2015, were as analysts had expected that the members voted unanimously to stay unchanged. The headlines from the minutes were that two MPC members decision were “finely balanced” between unchanged and raising interest rates. The market impact from the minutes was minimal, the release was as the mar…

At 10pm on Thursday 7May the BBC exit polls were released, defying the opinion polls from before the election, predicting the Conservative Party would gain the majority of seats. Sterling rallied in the FX markets nearly 2 cents (1.5245 – 1.5447), as traders repositioned for the exit poll outcome. The expectation in the run up to the election had been for a coalition government, however the permutation’s of government varied, but a Conservative majority was a distant outlier.…