Even though the U.K has been a shining light of economic growth over the past year or two leading to the IMF a few months ago to make a bold statement that it is the strongest economy in the G7 and upgrading future growth prospects, we have seen in recent month’s signs of a slowdown. Tonight in the U.K we have Inflation data by way of Consumer Price Index ( CPI ) that should give more clarity on how much if any that slowdown has been.
Forecasts are for inflation to fall from 1.5% to 1.4% , and for those who are not sure how important inflation readings can be , inflation in the extreme whether it be to low or high is not a good thing.
Lower inflation tells us that an economy is stagnating or slowing, leading to central banks reluctance to raise interest rates which can weigh on the currency of that country .The Pound has been the currency of favour especially in the past 2-3 weeks, but any continued evidence of a slowing economy could cause the currency to sell off.
The Euro Zone by comparison has not been an example of global growth in recent years. And in stark contrast the Euro Zone has been showing signs of rapidly diminishing growth and even though we have seen a selloff in risk assets through the global stock markets , the German DAX has fallen to fresh yearly lows against a backdrop of negative data . This has led to a belief that we are going to see a fresh wave of selling in the Euro, especially against the Australian and U.S Dollars.