The pound fell again against the euro, making it four days out of five last week, as analysts begin to doubt that UK interest rates may rise anytime soon.
The resolution of the crisis in Egypt and the end of the Chinese New Year celebrations also saw risk appetite improve giving a boost to the high yielding, commodity driven currencies like the Australian, New Zealand and Canadian dollars and South African Rand.
This week will see a raft of economic data out of the UK including inflation, unemployment, retail sales and consumer confidence and a EU finance ministers meeting which should influence rates.
The Chartered Institute of Purchasing and Supply reported this morning that UK unemployment is set to rise in coming months as the full impact of government spending cuts hit the public sector.
The “inflation” word will be to the fore internationally this week amidst concerns about rising food prices in emerging markets and concerns about rising interest rates, creating a drag on growth. Last week we saw China, Russia and India all take steps to tighten monetary policy due to concerns about rising inflation. This week we have UK, US and China CPI which is expected to increase yet again amidst concerns about ever increasing inflation levels.
The consumer will also be in focus this week with retail sales figures for both the UK and US. Particular attention will be on the UK figures after last month’s VAT rise though the US figures could also suffer as a result of January’s bad weather.
The focus for the euro this week will be the European Finance ministers meeting to discuss debt reduction targets after last week saw rising Portuguese borrowing costs.
Figures released today showed that Japan’s economy grew by 3.9% last year, not enough to hold off the challenge of China’s strong growth. China’s full-year GDP totalled $5,879 billion in 2010, ahead of Japan’s $5,474 billion.
Japan had been the world’s second-biggest economy behind the US since 1968, but has experienced sluggishness since the 1990s while China’s economy has boomed.
Commentary by Tony Redondo
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”
