By Max Clarke

Following the publication of various economic indices this morning, which revealed a narrowing UK trade gap; a drop in inflation levels; and a slight rise in house prices; currency expert Andy Scott from HiFX discusses the impact the various figures will likely have on the future of Sterling.

“It’s been a very busy morning for economic data from the UK and it continues to paint a mixed picture,” began Scott.
On inflation, Scott commented:

“The consumer price inflation data released this morning has shown that the annual rate of price increases actually slowed last month for the first time in eight months to 4%.

"The markets were expecting the rate of inflation to have remained up at the 4.4%. This will further reduce the chances of an interest rate rise at the MPC meeting next month and looking at the reaction of Sterling, it would seem the case, as it fell against all of its major counterparts. This will be welcome news to the Bank of England (BoE) who has resisted calls for a rate hike despite inflation having been above the 2% target since December 2009.”

On House Prices:

“Also released today was The Royal Institution of Chartered Surveyors (Rics) house price survey for March. This showed a slight improvement in house prices with fewer than expected surveyors reporting house prices declines versus those reporting gains across England and Wales. “

On the Trade Balance:

“The UK’s trade balance for March also showed an improvement, no doubt helped by the weaker Pound. There was an increase in exports and a decline in imports, narrowing the deficit to £6.78bn against expectations it would widen to £8bn. Finally, retail sales for March confirmed recent warnings from the high street that the consumer is spending less with sales falling 1.9% compared to a year earlier.”

Scott Concluded:

“The impact on Sterling as a result of lower inflation and reduced chances of an interest rate hike in the immediate future was a move lower across the board.

Against the Euro, Sterling fell 0.5% cent to 1.1240, the lowest since October last year. A test of the 12-month low of 1.1180 seems quite possible now but the big level most traders will be watching is €£ 0.90. It also fell 0.5% against the US Dollar to 1.6250.”