Inflation in the eurozone rose slightly in October, giving some hope that the spectre of deflation can be staved off. The flash inflation figure of 0.4% for October was up from 0.3% in September while the eurozone’s unemployment rate remained unchanged at 11.5%.
The ECB inflation target is close to, but below 2%. However, the decline in the inflation rate, together with sluggish growth, has put the bank under pressure to step up its stimulus measures. Adding to the worries about Europe’s largest economy, German retail sales posted their biggest monthly fall in more than seven years on Friday. EUR/USD peaked at 1.2609 from a low of 1.2485.
The yen slumped to the weakest level in almost seven years versus the dollar after the Bank of Japan unexpectedly increased monetary stimulus that tends to devalue the currency. Japan’s currency slid as much as 3%, the most since the central bank first expanded stimulus in April 2013.
Canada’s dollar weakened the most since 2011 after data showed the economy shrank in August for the first time this year, adding to bets the central bank will lag behind the Federal Reserve in raising interest rates. GBP/CAD peaked at 1.8093 from a session low 1.7887.
Dubai’s stocks advanced the most in a week amid optimism regional markets will benefit from the Bank of Japan’s revised stimulus as the Federal Reserve winds down its unprecedented bond buying program. The Dubai Financial Market General Index gained 1.6%, the most since Oct. GBP/AED trades this morning at 5.85.
India’s rupee completed the biggest monthly advance since May on optimism a drop in oil prices will further ease inflation and create room for the central bank to cut interest rates. GBP/INR opened this morning at 97.93 and currently trades at 98.0745.
UK News
GBP/EUR traded with a near one cent movement on Friday climbing from the session low of 1.2685 in early trade to hit 1.2782 in late Friday afternoon trading as weak Eurozone inflation data released puts more pressure on the ECB to ease policy further. This morning the market has breached 1.28 to touch 1.2803 and is just sitting below at 1.2790.
Sterling strengthened to a five-week high against the yen. It rose 2% after the Bank of Japan surprised markets with a decision to embark on more quantitative easing, sending the Japanese currency plummeting. GBP/JPY rallied to 179.54 from the opening of 174.68.
GBP/USD traded within a relatively small 60 pip trading range on Friday from a low of 1.5941 to the day high of 1.6011. Sterling had reached a six-year high against the dollar in mid-July on expectations that the BoE would start hiking interest rates by the end of this year. But those bets have since been pushed well back, with many now not expecting rates to rise until the second half of 2015.
The pound was set for its fourth straight month of declines versus the dollar, the longest losing run in 4 1/2 years, as investors pushed back their assessment of when the Bank of England will raise interest rates. The pound was little changed on Friday at $1.5996 and was down 1.3% in October. The market has opened at 1.5929 this morning and trades at 1.5975.
