Jay Mawji of Vantage FX (http://www.vantagefx.co.uk/) takes a look at news around the Eurozone on 14^th February 2012 – including new around UK inflation on Valentine’s Day.

“The only thing I would like to talk about is UK Inflation. Consumer Price Index fell to 3.6% today, down from over 4% at the last reading.

This news provides further evidence that the UK economy is on the right track. Inflation in the UK has been holding back the economy, with inflation reaching over 5% at times. I say inflation is key for the simple reason that high inflation has eaten into consumers spending power, which is the driving principle behind growth. As consumers ‘felt the pinch’ and struggled to make ends meet, they spent less in the shops. The retail world has struggled over the past months as they failed to attract consumers to spend their money. While consumers have kept their pockets closed because of rising prices, rising energy costs and weak sentiment, manufacturing has been steadily gathering pace. With positive manufacturing figures, the economy has begun building a strong base.

Now that inflation is beginning to fall and is coming closer to the 2% target, consumer spending will begin to circulate money around the economy which will help to reduce unemployment and spur on growth. The Bank of England Quantitative Easing project could act as a further catalyst to this cycle, bringing about a stronger UK economy. No doubt concerns will grow over the UK’s credit rating (something I chose not to contemplate at this stage), however this is attributed mainly to the Eurozone crisis and the ambitious Quantitative Easing project.

I chose not to worry about the UK’s credit rating today, but instead chose to sigh with relief at the sight of inflation declining.”

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