Currency Note Sterling

Sterling weakens against the US dollar and the euro

By Smart Currency January 17th, 2014

This week sterling weakened against both the euro and the US dollar, which hasn’t happened for a while, as it faced conflicting data and sentiment. Early pessimism over recent data performance was reversed on Tuesday following inflation data that hit the Bank of England (BoE)’s 2% target. This should have theoretically lowered the likelihood of an interest rate hike, but was overlooked by investors with increased optimism over a strengthening economy; this strengthened sterling. Analysts also looked forward with the belief that a falling unemployment level will continue to pressure the BoE in favour of raising interest rates. An uninspiring day followed, however, as BoE Governor Mark Carney announced that a dramatic increase was not expected. The only UK data released yesterday fell short of expectations; while not seen as hugely significant, the house price index from the Royal Institute of Chartered Surveyors came in behind expectations by showing an unexpected drop since last month; this helped sterling’s decline. As a result, sterling fell to its lowest point in over three weeks against the US dollar while also suffering a loss against the euro for the first time in three days. UK retail sales data out today has the opportunity to let sterling regain some ground or extend its losses. We will also hear from a member of the Monetary Policy Committee. Call your trader now for the latest sterling rates after a rocky week.