A mixed day for sterling saw it climb against the US dollar while faltering against a surprisingly resurgent euro. Sterling fell to an 11-month low against the US dollar on Friday as unemployment in the States fell to a six-year low. However, with the participation rate also dropping to the lowest level since 1978, sterling was able to recover on Monday due to this evidence of there being significant slack in the US job market. In contrast, sterling struggled against the euro, with investors unexpectedly ignoring a greater-than-expected decline in German factory orders in August. With the European Central Bank (ECB) recently pulling the trigger on a broad asset-purchase programme, investors may be getting behind the euro with a more long-term view of Eurozone recovery. This is, I suspect, wishful thinking on behalf of the investors as any road to recovery is going to be long and hard.
Today sees the week’s first major data from the UK, with manufacturing production figures released in the morning. After last week’s soft growth data, markets will be looking for any signs of a pick-up in production to encourage support for sterling.