Sterling has made significant gains in trade today as UK consumer prices rose to 3.7% vs an expected 3.4%. Inflation in the UK now stands at the highest level since April last year and is forecast to remain above the Bank of England’s 3% target for the near term. The recent VAT increase is expected to further weigh on consumer prices possibly extending inflation to a rate of more than 4% by February.

Last week saw a mixed bag of news for the UK economy and the British Pound. UK Retail Sales expanded at a slower pace than expected, The UK trade deficit widened and the BoE held both interest rates and the QE program at £200bn.

Yesterday both the ECB and the BoE announced that interest rates are to remain on hold for the time being. Markets are however starting to price in future changes due to headline inflation rates currently coming in above target in both sectors. Jean Claude Trichet indicated in yesterdays post meeting press conference that interest rates will have to be reviewed despite problems with sovereign debt and liquidity due to mounting inflationary pressures. Data released this morning from the eurozone is expected to show that inflation has risen to 2.2% in …

The Euro traded fairly sideways in opening trade this morning ahead of Italy and Spain’s bond auctions and the key interest rate announcements from the ECB and the Bank of England. markets also eagerly awaited the ECB press conference and news on monetary policy for the Eurozone moving forwards into 2011.

The recently battered euro received a boost Wednesday (January 12) as a successful bond action in Portugal was generally considered successful by experts.
Portugal was sold about 1.25 billion euro, or $1.62 billion through a bond auction. The impact of the debt sale should help prevent need for a financial bailout in the near future, which is positive news for the European Union, and the euro.
Also good news was the slightly lower (than that last bond auction in 2010) interest rate of 6.716 per cent that the government will have to …

Jean-Claude Trichet faces his toughest challenge yet as widening economic divergences within the euro-zone continue to put strain on Euro wide monetary policy. The Eurozone is clearly operating at two speeds which makes the required fundamental policy changes extremely difficult to implement.

The Euro opens today in a similar position to yesterday’s close. The markets are waiting to see what interest rate Portugal will have to pay for the €1 billion Euro’s they will need to raise through their 4 and 10 year bonds. If the rates are too high they may have to go cap in hand to the European Union and IMF for assistance. The EU has already helped bring the levels down of Portugal’s benchmark 10 year bonds from lifetime highs of 7.3% to the 7% level. Tomorrow also …