13, February 2013

GBP/USD (a 4-hour chart)

GBP/USD (a 4-hour chart)

British pound fell sharply the other day on rumors that the Bank of England in its quarterly report should raise its inflation forecast and estimated lower growth. The pound lost 140 points.

The producer price index for January at the input expected 0.9% to 0.2% in December, the producer price index for the output expected 0.2% versus 0.1%.

No change is expected in core consumer price index in the UK in January in annual dimension (compared to January last year), 2.4%, the retail price index (g / d) is expected to increase from 3.1% to 3.2%. No change is expected in House Price Index (y / y) 2.1%.

Sales of so-called covenant-lite loans represented about 55 percent of the debt sold to non-bank lenders in January, the greatest proportion ever, Morgan Stanley analysts wrote in a Jan. 25 report. Covenant-lite debt does not carry lender protection such as financial maintenance requirements. Mortgage loans and high yield bonds rated below Baa3 by Moody 's and below BBB by S & P.

In the credit markets, the cost of protecting corporate debt from default in the U.S. has grown in line with the Markit CDX Investment Grade Index, which investors use to hedge against losses or speculate on creditworthiness, rose 0.6 basis points to 90.

The indexes typically rise as investor confidence deteriorates and fall as it improves. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a swap protecting $10 million of debt.

The Bank of England has cut its growth forecasts and warned that the contraction of household finances will take longer than it previously thought, reports The Telegraph.