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Declining U.K. Exports Threatens Recovery, Keeping BoE on Alert

Declining U.K. Exports Threatens Recovery, Keeping BoE on Alert

2010-03-09 13:26:00
John Rivera, Currency Analyst
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FX3.09

Fundamental Headlines

• Venture-Capital Firms Caught in Shakeout – Wall Street Journal
• EU Leaders Call for CDS Supervision – Wall Street Journal
• Beijing says it will keep buying US debt - Financial Times
• Stocks Drop as Earnings Miss Estimates; Commodities Fall, Yen Strengthens - Bloomberg
• Fannie Mae Mortgage-Bond Spreads Trade at Lowest on Record: Credit Markets - Bloomberg


GBP/USDThe U.K. trade deficit unexpectedly widened to £7987M from £7010M as exports slumped. Demand from abroad for chemicals and other commodities led to the increases shortfall. Severe weather contributed slowed ports and could be a source of the weakness. Nevertheless, considering the pound’s weakness British goods are expected to have been more attractive. The BoE continues to remain on hold regarding monetary policy but has left the door open for additional quantitative easing as they see considerable slack in the economy. To discuss this and other topics, please visit the GBP/USD forum.

USD/CHF Swiss consumer prices rose 0.9% from a year ago in February, which was the third straight month of price growth. However,  inflation decelerated from 1.0% to 0.9% despite a 0.1% increase during the month. Economist were expecting a 0.2% increase over February with the annualized rate holding at 1.00%. The cost of services rose 0.4% which accounts for 58% of the contribution to total prices. Weakness in leisure and durable goods is evidence that consumers and businesses are using considerable discretion in their purchases. Subdued inflation will keep the SNB on alert and increases the chances that they could intervene in currency markets in an attempt to depreciate the Franc. 
 

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