A positive week for sterling has seen it recover lost ground against the euro – and hit the highest levels against the US dollar since November 2014. A quiet start to the week saw little data released from around the world, although sterling was able to make marginal gains against the euro following the breakdown of talks between the Greek government and the International Monetary Fund (IMF) on Sunday.
Tuesday, however, saw sterling jump higher against the euro, as inflation figures for May showed that the UK had rebounded from its recent spell of negative inflation. In contrast to this, disappointing German economic sentiment data provided a contrast between the trajectories of the two currencies. Wednesday saw the most significant movement for sterling, as better-than-expected wage growth from the UK allowed sterling to stretch its gains against the euro and US dollar further. With Thursday’s UK retail sales figures showing a 0.2% increase throughout May, sterling pushed to a level 5% higher against the US dollar than just pre the UK election. The resumption of talks between Greece and its creditors however, did see sterling lose some ground against the euro – but the British currency remains in a strong position.
A relatively quiet day from the UK lies ahead today, with only the release of public sector net borrowing to be released from the UK. This is expected to show a significant increase in the deficit over the previous month, but this is not expected to greatly affect the exchange markets.