21 Nov 2013
Flash: Inflation data impacting EUR and GBP - HSBC
FXstreet.com (London) - A research team at HSBC noted how recent developments in EUR and GBP have shown that inflation data is beginning to have a more important impact on the FX market.
Key Quotes:
“With rates of inflation declining in many countries, fears of an inflation undershoot or of outright deflation are growing”.
“In this environment there is a widespread desire to avoid currency strength as this will only add to deflationary pressures”.
“In addition, a weaker currency when inflation is low is a partial solution for deficient demand by boosting exports”.
“Low inflation is also important in the context of currency wars because some countries (notably the US) do not appear to have these concerns over currency strength. The line of least resistance is therefore for further dollar strength”.
Key Quotes:
“With rates of inflation declining in many countries, fears of an inflation undershoot or of outright deflation are growing”.
“In this environment there is a widespread desire to avoid currency strength as this will only add to deflationary pressures”.
“In addition, a weaker currency when inflation is low is a partial solution for deficient demand by boosting exports”.
“Low inflation is also important in the context of currency wars because some countries (notably the US) do not appear to have these concerns over currency strength. The line of least resistance is therefore for further dollar strength”.