A Rise in U.K. Inflation May Not Deter BoE From Additional QE

Fundamental Headlines

• TARP Cannot Save Some Banks – Wall Street Journal
• America's Newest Land Baron: FDIC – Wall Street Journal
• Equity markets cool after hitting new highs - Financial Times
• Bernanke Signals `Extended Period' May Be Even Longer as Joblessness Rises – Bloomberg
• Obama Urges Hu to Keep Promises on Yuan Appreciation as Trade Gap Widens -Bloomberg

USD/CHF – Swiss retail sales declined for a consecutive month in September by 1.6% as rising unemployment continues to lead consumers to retrench. A 8.9% drop in clothing lead declines personal goods, tobacco and furniture due to a reduction in discretionary spending. Swiss National Bank Chairman Jean-Pierre Roth in an interview today stated that 2010 will still be difficult for the economy as  "the exit of recession will be much longer than we observed in previous cycles." Therefore, expect the central bank to maintain their accommodative monetary policy for the foreseeable future.

GBP/USD – U.K. consumer prices rose for the first time in eight months in October as fuel costs and air fares offset declines in household goods and clothing. Inflation climbed to 1.5% from 1.1% the month prior, surpassing forecasts of 1.4%. The monthly gain of 0.2% and core prices creeping to 1.8% from 1.7% may be a sign that upside risks are increasing. Nevertheless, the BoE expects inflation to be volatile over the short-term but remain below their  2% target. Therefore, October’s results alone may not deter policy makers from adding to their asset purchase program at their next meeting.  To discuss this and other topics visit the GBP/USD Forum.