GBP (£) spikes to a near 6 year high against euro (€)

January 14th 2015

New 6 year high reached in early trading today 

GBP/EUR has traded to the highest level seen since October 2008 (1.2931 interbank) in this morning’s session. The upward trend is continuing and the possibility of reaching 1.3000 interbank is now more of a reality in the short-term. However, we have seen the rate rebound from this area of resistance before so a close watch is required to see if this move consolidates.     images   Sterling was to start on the back foot during yesterday’s trading as inflation figures were to fall for the month of December from 0.7% to 0.5%. A fall below 1% triggers a letter of explanation from Bank of England governor Mark Carney to the chancellor. This is because the CPI rate is more than one percentage point away from the Bank’s 2% target. Much of the fall was attributed to falling oil prices and many economists have suggested a further fall seems likely, creating a worryingly similar scenario to the eurozone and the threat to policymakers from deflation. One thing it certainly does is reduce the need for the bank to raise the base interest rate, something that caused Sterling to fall by over 0.5% against some majors following yesterday’s release at 09:30. Mark Carney was quick to calm the market over the threat of deflation, however, indicating that he expected rates to move up over the course of the next couple of years. As a result the pound was to find support in the afternoon session. Yesterday’s inflation release was the last major data release of note for the week (although watch out for a speech from Bank of England governor Mark Carney at 14:15 this afternoon). Focus will now move onto next Wednesday’s Bank of England minutes at 09:30. This will give a breakdown of how the nine members of the Monetary Policy Committee voted in relation to interest rates and will also give clues as to what monetary police the central bank may have in store for the future

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