A largely positive week for sterling has seen it move higher against both the euro and US dollar, thanks in part to UK core inflation beating expectations throughout October.
The week began quietly, with sterling trading largely sideways against its major trade partners on Monday thanks to little economic data influencing the markets. Although UK inflation contracted by 0.1% throughout the month of October, an unexpected strong growth in core inflation saw sterling strengthen across the board, hitting the highest level since early August against the euro. This was assisted by mounting speculation that the European Central Bank (ECB) may look to cut interest rates further, and expand their quantitative easing (QE) programme in December, and sterling continued to perform strongly against the single currency throughout the remainder of the week, despite little supporting data.
Movement against the US dollar on the other hand was sluggish throughout the early part of the week, but the unexpectedly cautious minutes from the Federal Reserve’s latest monetary policy meeting enabled sterling to make gains against the US currency, despite a decline of 0.6% in retail sales throughout October.
Today we will hear again from ECB President Mario Draghi, and any further hints he provides relating to monetary policy could see sterling move versus the euro.