Following on from last week, the Pound surged higher against almost all of the 16 most actively currencies except the Dollar as oil retreated and U.S consumer prices increased beyond initial estimates in May.
Despite a weakening labour market and reports that UK economic growth stalled in the first quarter, the Pound rallied higher against the Euro as the focus this week switches to the minutes from the Bank of England’s last policy meeting.
Although policy makers have acknowledged the current risks to economic growth are worsening, the tone of the report will probably reiterate the rising inflationary concerns that kept the BoE from lowering UK interest rates in June.
The voting pattern of the nine strong committee will also be closely watched as a resounding 9-0 in favour of no change will probably support the Pound.
The annual pace of inflation has reached the government’s 3.0% limit and the latest numbers will be of particular interest on Tuesday with consumer prices expected to increase 0.5% in May and 3.2% from this stage last year.
Despite a host of hawkish statements from a number of ECB officials over the past week, the Euro came under additional selling pressure on Friday as it emerged that Irish voters would reject the Lisbon treaty.
Although the news has weakened the Euro in the short-term and dealt a significant blow to the European Union the impact of the Irish rejection of the treaty will be limited.
The Euro has dropped to a near three month low versus the Dollar and the single currency may struggle to make gains this week amid a distinct lack of economic data released in the Euro-zone.
The focus will fall on the German ZEW survey for investor confidence, which is expected to fall further this month as inflation continues to accelerate and evidence mounts of slowing economic growth.
The Dollar recorded its biggest weekly gain against the Euro in almost three-years last week and consolidated under the support at 1.9500 versus the Pound as the prospects of a U.S rate hike over the coming months increased.
The improved outlook for the economy combined with rising inflationary concerns means that policy makers may lift rates from 2.0% as early as August after U.S consumer prices increased drove the annual pace of growth to 4.2%.
Data Released 16th June
EU 10:00 Harmonised Consumer Price Index (May Final)
U.S 13:30 Empire State Index (June)
U.S 14:00 TICs Capital Flows (April)
U.S 18:00 NAHB Housing Market Index (June)
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