The British pound rose after the new government released its first growth and public borrowing forecasts. The Office of Budget Responsibility, a newly created and independent agency whose aim is to take the responsibility of forecasting out of the Treasury’s hands, revealed that public spending would be lower than expected in 2011. The upbeat outlook was tempered by news that the UK’s growth predictions had been slashed to 2.6% yet markets appeared to focus on the positives giving sterling some welcome support.


The euro gained as well when industrial production in the 16 euro zone countries surprised to the upside showing growth of 0.8%. The single currency was also boosted by an improvement on risk appetite which saw equity markets across the globe rise to the benefit of higher risk currencies such as the euro and pound.


With the rally in equity markets taking full hold, the US dollar felt the brunt as safe haven positions were unwound. With no data of note released in the US, the greenback found it hard to find support in the face of renewed risk appetite.


The Bank of Japan has left the interest rates on hold at 0.1 percent which was widely expected. IT also said that they would put a cap to lending to 18-industries at 3 trillion yen and start the scheme at the end of August. The central bank also noted that they could change their economic assessment of the domestic economy which could support the yen.


Today investors will be focusing on the release of CPI data in the UK, inflation has started to become a concern to members of the Bank of England’s MPC. Meanwhile, the Euro Zone sees the German ZEW economic survey which could provide further support to the Euro although any positive news could be negated by the ongoing Euro Zone debt crisis. Across the pond, import and export prices and the NY Fed’s manufacturing index head up and otherwise quiet day for the US dollar.


• United Kingdom
RICS Housing Survey (May)
CPI (May)
RPI (May)

• United States
Import/ Export Prices (May)
NY Fed Manufacturing (Jun)
NAHB Housing Market Index (Jun)

• Euro Zone
Employment (Q1)
Eurostat Trade (Apr)
Germany – ZEW Survey (Jun)