Both sterling and the euro continue to be the whipping boys in FX markets at the moment as the outlook for both currencies remains rather bleak. For sterling the writing was on the wall towards the end of 2014 as investors were becoming used to economic data that was showing the UK economy was coming off the boil and the BOE was clearly pushing back interest rate hike expectations, then there was the small consideration of the General Election which creates a great deal of uncertainty since it is unclear what the next government will look like or how long it will last. For the euro the picture is not much different as the up and coming Greek General Election is in a couple of week’s time which has the potential to inflame the Eurozone sovereign debt crisis and inflation continues to head lower (along with crude prices, lower yet again this morning) raising the prospect of full blown QE later this month.
Both GBPUSD and EURUSD are just about holding steady this morning trading at 1.5135 and 1.1870 respectively and today inflation is centre stage once again with the release of Eurozone CPI. Core inflation is expected to decline from 0.7% to 0.6% and headline CPI from 0.3% to 0.0%.
With crude continuing to decline it’s worth keeping an eye on weekly stockpile figures in the US this afternoon and then later this evening the FOMC minutes should also be monitored for any indication on interest rates as the jury remains firmly out in respect of timing for rate hikes from the Federal Reserve.