By ForexMansion.com
Pound Break Out
Major currency pairs are little changed except for the Pound which broke out above resistance. Positive risk sentiment continued with Asian equity indices mostly higher supported by improvements in the situation in Japan. The New Zealand dollar was a big mover, rising 0.8% against the dollar. NZD was one of the worst performing currencies since the earthquake in Japan and has, until recently, lagged the recovery of high yielding currencies.
In the UK, both the CPI and the RPI were released. According to The Office for National Statistics, the consumer prices index rose 4.4% in the 12 months to February, the highest year-on-year increase since October 2008. Core CPI inflation, which excludes items including energy, food, alcohol and tobacco, was the highest since records began in January 1997, at 3.4%. Inflation has now been more than a percentage point above the bank’s 2% annual target for more than a year and its own forecasts anticipate inflation remaining above target until 2012.
Policy makers have so far resisted raising the bank’s benchmark interest rate from an emergency low of 0.5% introduced two years ago in an effort to recover the economy. Tomorrow the BAA mortgage approvals will be released at 930 GMT. At 1230 GMT, the Budget report will be released.
EUR/USD is little changed overnight after making a new high for the cycle of 1.4250, still driven by interest rate differentials and confidence that EU leaders will be able to patch up the situation in the periphery for now. EUR/USD is now eying the November 2010 high around 1.4282 after breaking convincingly above 1.42 on Monday. The spread between German and US 2-year yields made new highs of 109bps on growing expectations for ECB rate hikes. New Orders will be released tomorrow at 10:00 GMT.
The improvement in risk appetite continues to be driven in large part by the stabilization of the nuclear situation in Japan. TEPCO expects to restore power to parts of the most damaged reactors, 1 through 4, by the end of today.
