A positive week overall for sterling which also saw it reach fresh 7-year highs against the euro, although at the time of writing this note we seem to be close to where we started the week against the euro. Highlights the importance of timing yet again. Against the US dollar sterling held steady – until Thursday when it made significant gains.
With little economic data released at the start of the week, sterling traded within narrow bounds against the US dollar and investors seemed unwilling to act in advance of the Bank of England (BoE)’s inflation report later in the week. Performance against the euro was more positive, and sterling reached multi-year highs on a number of occasions throughout the week, as Eurozone finance ministers failed to reach a deal to renegotiate Greek debt. Thursday proved to be the best day for sterling, with the BoE’s inflation report revealing increased growth forecasts for both 2016 and 2017. Despite the announcement that inflation is likely to weaken in the short-term, this was attributed to falling oil and energy prices, and inflation is expected to rise again to 2% in the not too distant future. With the BoE hinting that interest rates could rise early in 2016, sterling benefitted.
A quiet day for UK and international economic data lies ahead, although given other world event such as the Greek debt crisis and the conflict in Ukraine this doesn’t necessarily equate to a quiet day in the currency markets