Currency Rates:

US$/GBP - 1.577

Yesterday saw CPI inflation data released for the UK. The figure showed the annual rate increase to 3.5% in January from 2.9% in December – the biggest monthly rise in inflation since November 2008 prompting Mervyn King to write an explanatory letter to the Chancellor. In this letter, the Governor outlined that he expects inflation to return towards the targeted 2.5% as spare capacity absorbs price pressures. This is fair, as a lot of inflationary pressure (especially on house prices) is caused by a lack of supply in the market – when this returns, prices should return to targeted inflation. Out today, we have the minutes from the last meeting of the Monetary Policy Committee. The minutes are expected to follow last week’s Inflation Report and Mervyn King’s letter yesterday – so the potential for large sterling movement is limited, as traders/ investors have already priced in an expectation of a drop in inflation later on in the year. Also out today is unemployment data which is expected to show a further drop in unemployment. This could see sterling strengthen if this is better than expected so give us a call if you need to make any payments.

The US dollar weakened across the board against the other major currencies as risk appetite returned to the market. Sterling in particular reached a two week high against the US dollar breaching the $1.58/ £1 barrier first thing this morning. Industrial production figures are expected to show a 0.6% rise from January. Call in today to ensure you take advantage of sterling’s relative strength against the US dollar.