020 7898 0500A stronger day for sterling saw it make gains against the euro and the US dollar, despite poor UK data releases. UK economic growth failed to improve from an earlier 0.7% growth estimate and exports and business investment fell more than expected, although overall economic performance remained positive. Despite these surprise failings, sterling rallied strongly, making a third straight day of gains against the US dollar which was probably more the result of disappointing US data. Also the recent shift in expectations for a UK interest rate hike to not take place until late 2015 has now been priced into the markets. Having dropped to a 14-month low against the US dollar last week, this seems to be limiting further short term downside risk for sterling.
A quiet day for the UK on the data front today could see sterling continue its recent strong form. Better-than-expected inflation data from Germany could see sterling suffer, however, especially if there are further signs of the Eurozone’s largest economy coming out of its slump.
