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UK Data Sends Pound to Euro Exchange Rate & Sterling to Dollar, Swiss Franc & Australian Dollar Higher

July 15, 2014 - Written by Ben Hughes

Strong UK data sends the Pound Sterling (GBP) exchange rate complex surging against the Euro (EUR), US Dollar (USD), Swiss Franc (CHF) and Australian Dollar (AUD) yesterday.

The Office for National Statistics said that consumer prices in the United Kingdom increased by 1.9% in June, adding to the 1.5% figure seen in May and takes the rate just off of the Bank of England’s inflation target of 2%. The inflation rise was better than the 1.6% increase forecast by economists.

The news saw the pound to australian dollar exchange rate itrade 0.57 per cent higher at 1.82980, the pound to euro exchange rate (GBP/EUR) sit 0.5 per cent higher at 1.26073, and the pound to dollar exchange rate (GBP/USD) rally 0.3 per cent higher at 1.71392.

Clothing and footwear prices rose 0.6%, food and non-alcoholic drinks gained 0.1% and transport costs gained 0.6%.

The Pound Sterling Advances on Strong Signals of UK Recovery

Following the release of the data the Pound Sterling (GBP) surged as investors increased their speculation as to when the Bank of England will begin to raise interest rates from the current record low level of 0.5%. Speculation that the Central Bank now has a case to withdraw its emergency stimulus measures also rose as the UK’s broad economic recovery sees no sign of stalling.

“The amount of spare capacity in the UK economy is being eroded. Given the BoE is targeting inflation in 2 years time, not what it is doing right now, we now favour a rate hike in November,” said James Knightley an economist at ING.

Despite the data some economists are suggesting that the inflation rise was something of a one off with some saying that the late start to the annual summer sales will see the rise in inflation be temporary.

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"The rise in clothing inflation ... seems to have largely reflected the later start to the summer sales this year than last, so its annual inflation rate should ease soon, In addition, a further significant rise in food inflation .... Seems unlikely, given that global agricultural commodity prices have fallen in recent months and a price war between the supermarkets appears to be building," said Samuel Tombs from Capital Economics.

Sticking with inflation data the Swiss Franc softened after data showed that the Alpine nation’s rate unexpectedly remained unchanged last month. According to official data released by the Federal Statistical Office, Swiss PPI remained unchanged at a seasonally adjusted 0.0% from the 0.1% seen in the previous month. Economists had been expecting Swiss PPI to rise by 0.1% last month.

The Swiss Franc Exchange Rate Finds Support

Earlier in the session the Franc had been finding some support due to its safe haven status as concerns over Ukraine increased once more.

Ukraine’s government accused Russia that its forces shot down one of its military airplanes. The An-26 transport plane was shot down yesterday over eastern Ukraine. The weapon used is believed to have been one not previously used by the pro-Russian separatists suggesting that the shot was fired from inside the Russian border.

“Ukraine, as never before, is on the brink of wide-scale aggression from our neighbour,” Mykhaylo Koval, deputy head of Ukraine’s National Defence and Security Council, said late last night. The comments dented hopes for European led peace talks and raised the possibility of open conflict between Russia and Ukraine.

The USA meanwhile called on the EU to impose further sanctions upon Russia.

“While Russia says it seeks peace, its actions do not match its rhetoric,” said the US government in a statement.

Against the Euro the Swiss Franc was firmer after the single currency was weakened by data from the ZEW institute which showed that sentiment in Germany fell to its lowest level in 19-months with a reading of 27.1. For the entire euro zone, the ZEW economic sentiment index rose to 61.8 this month, from a reading of 58.4 in June, below economist expectations for an increase to 62.3.

Currency News Update - 16/07/2014



The Pound to Swiss Frand exchange rate (GBP/CHF) advanced strongly after the UK currency was boosted by the release of better than forecast inflation data. The report showed that inflation rose to 1.9% just off of the Bank of England’s target level of 2%. The positive report increased speculation that the Bank of England will raise interest rates before the end of the year.

Pound Exchange Rates Today - 16/07/2014



The Pound to Australian Dollar exchange rate is trading up 0.08% at 1.83260 GBP/AUD.
The Pound to Canadian Dollar exchange rate is trading down 0.03% at 1.84392 GBP/CAD.
The Pound to Swiss Franc exchange rate is trading up 0.22% at 1.53861 GBP/CHF.
The Pound to Euro exchange rate is trading up 0.21% at 1.26577 GBP/EUR.
The Pound to Japanese Yen exchange rate is trading down 0.01% at 174.27235 GBP/JPY.
The Pound to Norwegian Krone exchange rate is trading down 0.24% at 10.62001 GBP/NOK.
The Pound to New Zealand Dollar exchange rate is trading up 0.19% at 1.96817 GBP/NZD.
The Pound to Dollar exchange rate is trading down 0.07% at 1.71305 GBP/USD.
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