Over the course of the week it has been broadly positive for sterling. Against the US dollar, sterling has had one its best weeks in quite a while gaining over a cent. Is this a change in fortune or simply a period of respite before we continue the downward trend? I would err on the side of caution for the time being and assume it is a period of respite. Against the euro we are close to where we started the week but there have been some significant movements which have been either opportunities to buy or sell euros which again highlights the need for careful planning.
UK data this week has been limited after a busy week last week. The Bank of England (BoE)’s quarterly bulletin suggested that the UK economy is well placed for gradual interest rate rises. Tuesday saw mixed results for sterling, with manufacturing production showing a surprise contraction throughout November. With Wednesday proving to be another quiet day on the data front, sterling continued to drift lower against the euro while strengthening for a third consecutive day against the dollar as BoE Governor Mark Carney warned of the threat of further low inflation. Thursday saw sterling recover against the euro as the European Central Bank (ECB) revealed another disappointing pick up of their long-term loans to banks within the Eurozone. With the Eurozone’s banks still not getting fully behind ECB measures, sterling was able to recover much of the week’s losses against the euro.
Another relatively quiet day on the data front lies ahead, with the Producer’s Price Index (PPI) and University of Michigan Consumer Sentiment from the US taking centre stage.