Stronger Than Expected U.K. Growth Creates Difficult Decision For BoE
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EUR/USD – Euro-zone consumer prices accelerated in January by 1.0%, which was the fastest pace in a year. Energy and transportation costs surging 4.0% and 4.9% respectively were the main drivers of price growth. Declines in food, recreation and housing are evidence that inflation isn’t a threat to price stability for the region. Indeed, CPI is well below the ECB’s 2.0% target which will allow them to take a measured approach to monetary policy. To discuss this and other topics, please visit the EUR/USD forum.
GBP/USD – The second reading of U.K. GDP was revised higher to 0.3% from 0.1% as the country emerged from its recession. Consumer spending increased by 0.4% and based on the jump in the CBI retail survey is expected to continue, which bodes well for future growth. A 3.7% surge in exports from 0.1% confirms the BoE’s expectations that a weak sterling and improving global economy is generating demand from abroad. A 3.1% drop in gross fixed capital formation is evidence that tight credit markets are curbing investment. A faster pace of growth and signs of improving consumer spending could put upward pressure on prices making it difficult for the BoE to remain on hold. To discuss this and other topics, please visit the GBP/USD forum.
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