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Pound Recovers Recent Losses As UK Annual Inflation Eases In August

Sep 18 2012

The pound recouped some of its previous session's losses against other major currencies in early deals Tuesday after an official report showed that the U.K. annual inflation slowed in August.

The U.K. annual inflation eased to 2.5 percent in August, in line with expectations, from 2.6 percent in July, data from the Office for National Statistics revealed today.

With the exception of the June 2012 inflation figure of 2.4 percent, this was the lowest rate of annual inflation since November 2009.

The annual core inflation rate, excluding energy, food, alcoholic beverages and tobacco, fell to 2.1 percent from 2.3 percent in July.

Month-on-month, the consumer price index climbed at a pace of 0.5 percent, following a 0.1 percent rise in July.

Retail price inflation slowed more than expected in August, to 2.9 percent from 3.2 percent in July. The expected rate for August was 3.1 percent. Likewise, the retail price index, excluding mortgage interest payments, rose 2.9 percent, down from 3.2 percent in July.

At the same time, house price inflation in the U.K. eased more than expected in July, a survey report from the Office for National Statistics revealed today.

The ONS house price index rose 2 percent year-on-year in July, slower than 2.3 percent gain in June. This was also weaker than the 2.1 percent rise forecast by economists.

On a seasonally adjusted basis, the house price index remained unchanged between June and July.

On an year-on-year basis, house prices in England rose 2.4 percent. Prices rose 5.7 percent in London. However, this was offset by a 1.1 percent fall in Scotland, 0.2 percent in Wales and a 10.9 percent dip in Northern Ireland.

European stocks fell amid rising tensions between China and Japan over a worsening territorial dispute in the East China Sea and renewed worries over Spain's financial woes weighed on the markets.

The European Commission Vice President Joaqu?n Almunia on Monday urged Spanish Prime Minister Mariano Rajoy to make up his mind soon about asking for a second bailout.

European stock markets are trading lower, with the U.K.'s FTSE 100 Index falling almost 0.70 percent, French CAC 40 Index slipping 1.07 percent and the German DAX Index dropping 1.0 percent.

The pound advanced to a 5-day high of 0.8036 against the euro around 7:00 am ET, up almost 1 percent from last week's fresh multi-month low of 0.8117. Further upside momentum could help the sterling re-test the 0.80 level in the near-term.

Germany's economic sentiment improved in September after easing for four straight months, the Mannheim-based ZEW said today. The ZEW Indicator of Economic Sentiment rose 7.3 points to -18.2. However, the negative reading indicates that the financial market experts expect the German economy to lose momentum over the next six months.

The pound that fell to a 4-day low of 1.5014 against the Swiss franc around 4:00 am ET staged a rebound shortly thereafter. The pound-franc pair is presently trading at a session's high of 1.5089 with 1.5120 seen as the next likely resistance level in the near-term.

The Swiss federal government's expert group downgraded its economic outlook citing weak global conditions. Nonetheless, the group does not foresee a marked recession in Switzerland thanks to the robust domestic economy and the floor currency exchange rate.

The State Secretariat for Economic Affairs (SECO) forecast the economy to expand 1 percent this year, down from the prior estimate of 1.4 percent. It forecast a modest growth over the coming quarters. For 2013, the growth projection was trimmed marginally to 1.4 percent from 1.5 percent.

The pound also erased some of its early London session losses against the currencies of the U.S. and Japan in the middle of the session. The pound is presently quoted at 1.6258 against the dollar, up from previous low of 1.6223. The UK currency also recaptured 35-pips against the yen, rising to 127.86 from a low of 127.51.

Looking ahead, the U.S. current account balance for the second quarter, net TIC flows for July and the NAHB housing market index for September are the key data to watch in the North American session.

The material has been provided by Instaforex Company -
TAGS: Pound  Recovers  Recent  Losses  As  UK  Annual  Inflation  Eases  In  August   

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