Tuesday, the pound rose to a 2-month high against the euro and the Swiss franc as U.K.'s annual inflation accelerated in October for the first time since February 2009.
UK annual inflation rose to 1.5% in October from 1.1% in September, according to a report released by the Office for National Statistics today. Annual inflation accelerated for the first time since February 2009 and stood slightly above the expected rate of 1.4%. On a monthly basis, consumer prices were up 0.2%, faster than the 0.1% expected.
Core inflation that excludes volatile energy, food, alcohol and tobacco prices, stood at 1.8% on a yearly basis, up from 1.7% in September.
However, the broader measure of inflation known as the Retail Price Index, which includes the cost of housing, is still 0.8% lower than a year ago, compared with a fall of 1.4% in September. Economists were looking an annual 1% decline. The index stood at 216, up from 215.3 in the prior month. Excluding mortgage interest payments, retail prices increased at a faster pace of 1.9% annually compared to 1.3% in September.
The UK currency soared to 0.8852 against the euro during Tuesday's early trading. This set a highest point for the UK currency since September 15, 2009. The next upside target for the UK currency is seen around the 0.877 level. The euro-pound pair closed Monday's deals at 0.8904.
A report from the Eurostat showed that Eurozone unadjusted trade surplus stood at EUR 3.7 billion in September, up from a deficit of EUR 2.3 billion in August, revised from EUR 4 billion deficit reported initially. A year ago, the trade deficit was EUR 6 billion. Exports dropped 18% year-on-year to EUR 111.8 billion in September, while imports fell 24% to EUR 108.1 billion.
By about 4:30 am ET, Tuesday the pound advanced to a 2-month high of 1.7023 against the Swiss franc. This may be compared with yesterday's close of 1.6952. On the upside, 1.7408 is seen as the next downside target for the Swiss currency.
The franc fell against other major currencies today as the Swiss retail trade turnover declined for a second straight month in September. The Federal Statistical Office said Switzerland's real retail trade turnover declined 1.6% in September from the corresponding month of the previous year. Sales were down 1% in August, following July's 1% increase. Sale of food increased 1.1%, reversing 0.3% fall in August. Meanwhile, clothing and footwear sales declined 8.9%.
Extending its Asian session downtrend, the pound fell to 149.41 against the yen during early European deals. But by about 3:15 am ET, the UK currency gained ground and rose to 150.24 as of 4:30 am ET. The pair that closed yesterday's deals at 149.82 is now quoted at 149.91.
Against the US currency, UK's cable recovered Tuesday's Asian session losses during early European deals. The cable thus climbed from 1.6800 to 1.6875 by 4:30 am ET, with 1.703 seen as the next resistance level. At Monday's New York session close, the pair was quoted at 1.6819.
In the New York session, the U.S. Labor Department is scheduled to release its report on the producer price index for October at 8:30 am ET. Economists expect the headline index to show 0.5% growth and the core index to show 0.1%growth.
The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for September at 9 am ET.
The industrial production report of the Federal Reserve is due out at 9:15 AM ET. Economists estimate that industrial production rose 0.2% in October, while capacity utilization is expected to come in at 70.5%.
At 10:00 am ET, Richmond Federal Reserve Bank President Jeffrey Lacker is due to speak on the economic outlook to the Virginia House Appropriations Committee in Richmond.
The National Association of Homebuilders is scheduled to release the results of their survey on homebuilders' confidence at 1 pm ET.
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