Currency Note Sterling

Is Sterling running out of energy?

By Ricky Bean June 9th, 2014

Sterling’s trend against the euro is one of sterling strengthening while against the US dollar it is moving sideways. Over the course of last week sterling only gained a little bit of ground against the euro, pushing above the 1.23 level by the end of the week and thereby maintaining the upward trend. Following the European Central Bank announcement on Thursday, we even saw sterling hit the 1.24 level, a sixteen month high, albeit sterling soon gave back the gains. Against the US dollar the trend is, as mentioned, sideways with a range from 1.67 to 1.69.

Economic releases in the week ahead are not as many as last week but could have a significant bearing as they will either underpin the confidence in the UK economy or undermine it. Tuesday sees the release of industrial and manufacturing production figures which are expected to show continuing growth in the UK economy. In fact, if the industrial production figures hit expectations, industrial production will hit a post crisis high. The main economic event for sterling will be on Wednesday, with the release of the unemployment rate. After dropping below 7% earlier in the year, this important indicator of economic strength is expected to fall further to 6.7%. Therefore, if these releases are as expected and we don’t get any major shocks from elsewhere it seems reasonable to assume that the sterling trends noted above will continue for the time being.