I said a bang, bang, bangity-bang, a bang, bang, bangity-bang! Thanks to weaker than expected economic data and general risk aversion, the pound got blown out of the water yesterday. GBP/USD dropped nearly 100 pips to finish at 1.6264, while GBP/JPY slid 220 pips all the way down to 136.13!
The main culprit in yesterday’s shootout was the consumer price index. The index was way off the predicted 4.4% figure, as it printed year-on-year inflation to be at 4.0%. This indicates that inflationary pressures may be dying down, which could give the BOE reason NOT to hike rates any time soon. As a result, we saw the pound take some bullets to the chest as it fell right after the release of the report.
Remember, one of the main themes in the market right now is interest rates, so it’s no surprise that this report caused quite a ruckus in the markets.
In other news, the U.K printed a smaller trade deficit, printing at 6.8 billion GBP for the month of February. This was much better than the expected 8.1billion GBP, and a nice improvement from the previous month’s deficit of 7.8 billion GBP.
The important thing to note here is that the narrowing of the deficit was due to the rise in exports to non-EU countries, which rose 7.6%. With many EU countries struggling right now, developing trade relationships with non-EU countries will be crucial over the next few months.
Will the pound bounce back today? Or will it head even lower down the charts? Tune in at 8:30 am GMT, when the weekly claimant count change report will be released. Word is that 3,000 less people filed for jobless claims last month, which would be a nice follow up to last month’s figure of 10,000. Be careful though, because if this report comes in worse than expected, we might just see another round of pound selling! Good luck!