Sterling seems to be suffering a summer malaise losing, since the beginning of July, over four cents against the US dollar and nearly one and a half cents against the euro. This is surprising given the economic data out of the UK has been on the whole positive. We will have to see if this week’s data manages to reverse the recent trend in what is a busy week for data releases worldwide.
Wednesday is set to be a key day for sterling as we expect a host of high-impact events. The Average Earnings Index has received a fair amount of attention in the media recently due to some concern about this area of the recovery. Data showing that average earnings are starting to increase at a healthy rate is likely to boost sterling, while continued stagnation will undermine the currency. In addition to this, we also have the release of the UK unemployment rate. The rate has been falling fairly consistently during 2014 and this month’s figures are expected to come out at around 6.4%. Significant divergence either side of this is likely to affect sterling performance. Finally, the Bank of England inflation report and address by Governor Mark Carney are always closely watched – any hints regarding the raising of interest rates are likely to provoke sharp movements in sterling rates. To round off the week, the second estimate of UK growth data in the second quarter will be released on Friday and may have an impact on sterling strength.