U.K. Trade Deficit Widens in March, ECB Sees 2010 Inflation at 1.4%
• U.K. Coalition Holds Risks for Clegg – Wall Street Journal
• Euro Gives Up Early Gains – Wall Street Journal
• U.K. Coalition Holds First Cabinet Meeting - Financial Times
• Euro Weakens for Third Day on Debt Concern; U.S. Futures, Commodities Drop - Bloomberg
• Cameron Enlists King as Coalition Ally After BOE Bestows Budget “Blessing” - Bloomberg
EUR/USD – The European Central Bank published their monthly report for May following the policy makers decision to keep interest rates unchanged at its meeting on May 6th. The central bank said that interest rates are “appropriate” and that inflation is expected to remain “moderate,” a signal that that the ECB has no intention to tighten policy any time soon. At the same time, the Frankfurt-based central bank said Greek plan helps safeguard Euro-zone financial stability. Nevertheless, the ECB announced that forecasters see 2010 and 2011 inflation at 1.4% and 1.5% respectively. In Greece, the unemployment rate jumped to 12.1% in February from 11.3% the previous month to mark the highest reading on record. Meanwhile, European Central Bank Executive Board member Lorenzo Bini Smaghi said that European countries should have helped Greece backed in February, which “would have avoided three months of instability.” To discuss and other topics, please visit the EUR/USD forum.
GBP/USD – Trade deficit in the U.K. widened in March amid imports advancing the most in six months on the back of demand for goods from cars to engineering equipment. Figures showed that the goods – trade gap was £7522 from a revised -£6305 the previous month amid economists’ forecasts for a 6407 deficit. Even though the demand for British goods is not great, demand is rebounding on the back of a weaker British pound. Taking a look at the breakdown of the report, imports rose 29 billion pounds in March, while exports added 21.4 billion pounds. Looking ahead, the ongoing uncertainties surrounding the outlook for monetary and fiscal policy is likely to weigh on the exchange rate as investors consider the prospects for a sustainable recovery. To discuss and other topics, please visit the EUR/USD forum.
Written by Michael Wright, Currency Analyst
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