Rational FX: Europe Consumer Price Index Year on Year data due today [28/02/2011]

Fridays Market Movers

• From UK, we had Gfk Consumer Confidence increase by one point from the previous reading, which supported GBP going back to 1.6150 levels.

• UK GDP for the fourth quarter of 2010 came out even worse than previously thought. The actual percentage of decline was 0.6%. If we have another negative GDP figure next quarter we will technically be back in recession. This figure weakened sterling across the board against all of its major counter parts.

• On Friday German CPI came out as expected at 0.5%. This gave little support to the Euro however the Libyan crisis is still dominating risk aversion.

• From the US on Friday we also had GDP for the fourth quarter of last year which came out worse than expected. However this still showed that the US economy is growing y a mere 0.2%. This helped the US dollar trade in a tight range against the Euro.

• Real personal consumption in the US on Friday also came out slightly worse than expected. This showed that the general public is not in a position to spend consistently especially as inflation on food and fuel is leaving most with less disposable income.

Today’s Market Movers

• The first piece of data out today for the Euro zone is Consumer Price Index YoY. This is expected to come out slightly better than previous showing the inflation is becoming more and more of a problem in the EU economy. Will Trichet end his term as president of the ECB with a rate rise?

• We have no significant data in the UK. But US pending home sales could be detrimental as a negative figure is likely to encourage risk aversion.