Very difficult to know quite what to make of this week’s movements for sterling. Was the movement driven by news from elsewhere or are worries over next week’s General Election beginning to surface as yesterday sterling lost significant ground against the euro and reverse its recent trend against the US dollar.
Data out of the UK highlighted that first quarter growth was disappointing although it has to be noted that this was only the first estimate which is then often subject to significant adjustments in subsequent updates. This contrasted sharply with data out of the Eurozone which showed that things were improving, albeit from a low base, plus the Greek bailout seems to be back on track. The euro has gained nearly three cents against sterling during the course of this week.
Against the US dollar the picture was the exact reverse, apart from yesterday, with sterling having gained around nine cents since the middle of April. The drivers for this US dollar weakness are worries over the US economy and the timing of US interest rate rises which are drifting into the future.
Today sees the release of UK manufacturing growth data, which is forecast to show further steady growth. This number has been increasing steadily since the turn of the year, and further strength could boost sterling.