A tough week for sterling has seen it fall sharply against both the euro and US dollar, with investors nervous ahead of the release of the new government’s first annual budget on Wednesday. A quiet start to the week saw sterling gain slight ground against the US dollar but surprisingly weaken against the euro following the Greek people’s decision to reject the bailout offer proposed by the country’s creditors.
Sterling saw a sharper decline on Tuesday across the board, losing ground throughout the day as investors flooded to the relative safety of the dollar. With the UK chancellor expected to unveil a tightening of fiscal policy in the annual budget on Wednesday, sterling continued to find itself under pressure, falling the to the lowest levels in a month against the US dollar as well as three-week lows versus the euro.
Sterling did see some recovery on Thursday, partly reversing the losses experienced earlier in the week as market confidence in sterling returned, and US unemployment claims read a higher figure than expected.
Today we will see release of the latest UK trade balance, which is expected to show an increase in exports compared to imports. Construction output is also forecast to increase to 0.7%, although following some recent weakness in UK data this could disappoint.