Sterling seems to be finding it difficult to regain any upward momentum against the euro which is a surprise given the data and news flow out of the Eurozone seems to be mostly negative. Against the US dollar there are brief moments of respite for sterling but the momentum certainly favours the US dollar. This could all change very quickly with the release of the minutes of this week’s Bank of England meeting later this month if they show a growing clamour for increased UK interest rates which would be a catalyst for sterling strength.
A mixed week for sterling saw it rally early in the week, before faltering on the back of further poor manufacturing data. Early in the week we saw purchasing managers’ indices (PMI) from both the construction and services industries, which pointed to better-than-expected outlook from these industries throughout the month of July. With services PMI reaching an 8-month high, sterling hit its highest levels since the end of July against both the euro and US dollar. However, this positivity was not to last, as disappointing manufacturing production data on Wednesday saw sterling fall across the board, losing much of its gains against the US dollar. Yesterday saw sterling again rise against the euro, with comments from European Central Bank (ECB) President Draghi further increasing uncertainty over the recovery in the Eurozone. A quiet day today sees little influential data from around the globe, with markets still digesting yesterday’s ECB announcements.