Dollar extends gains over Sterling following strong CPI
20 February 2008
The US Dollar continued to strengthen against Sterling today after the release of stronger than expected US inflation data. The figures cast doubt over whether the Federal Reserve will continue to aggressively ease monetary policy in the months ahead.
The US consumer price index rose by 0.4% in January bringing the annual equivalent to 4.3%, driven by rising food prices. More significantly, core CPI which excludes food and energy price volatility rose by 0.3% in January to 2.5%y/y, the strongest rise since June 2006.
In a separate report, US building permits fell to 1.048 million, breaking new ground in January, falling by 3% as expected to its lowest rate in 16 years. Building permits are a key indicator of builder confidence in the housing sector. In contrast, US housing starts bounced slightly to 1.012 million, in line with expectations, showing signs of weakness ahead in the housing market.