Currency Note Sterling

Sterling – range bound against the euro, strengthening against the US dollar

By Ricky Bean May 15th, 2015

A mixed week for sterling has seen the initial gains from the Conservatives victory in the general election pared back following a surprisingly negative quarterly report from the Bank of England (BoE).

The week had started strongly as sterling soared to fresh monthly highs against both the euro and US dollar, as investors reacted positively to confirmation that UK economic policy would continue along the same path it had for the past 5 years. Better-than-expected manufacturing production figures on Tuesday supported this move, with sterling hitting a fresh 2015 high against the US dollar. Sterling continued to move in a positive fashion first thing Wednesday, thanks to a sustained strong wage growth of 1.9% over the past 3 months compared to the same period of last year, further boosting investor confidence.

However, when the BoE revised their economic growth forecast for the year down to 2.4% from 2.9%,the currency sterling fell across the board, although it still held on to most of the gains seen this week. A quiet Thursday left sterling trading within narrow boundaries, although a surprise contraction in the US producer price index saw sterling make slight gains against the US dollar. Confirmation from the President of the European Central Bank that their programme of quantitative easing would run its full course enabled sterling to regain lost ground against the euro during Thursday.

A quiet end to the week sees only construction output figures released from the UK. With this delayed figure carrying little impact on investor sentiment, we are likely to see market movement driven more strongly by further reaction to the quarterly report.