So far this month sterling has gained a little bit of ground against the US dollar, underpinned by the US not raising interest rates, and sideways against the euro, having lost significant ground to the euro in the second half of August. Even though the US Federal Reserve has indicated that a rate hike could still take place before the end of 2015, sterling finished the week close to a one-month high.
The week ahead promises to be relatively quiet for sterling, with little in the way of economic data releases from the UK. Housing inflation data on Monday is likely to pass by largely unnoticed as it only reports on asking prices, which can differ significantly from actual selling prices. Public sector net borrowing figures on Tuesday are likely to carry more weight, with last month’s deficit turning positive.
Elsewhere, investors will be paying particular attention to the Eurozone, where European Central Bank (ECB) President Mario Draghi will be speaking on Wednesday. With sterling recently underperforming over the past month against the euro, this speech provides an opportunity for sterling to recover some ground if he continues to emphasis the ECB’s programme of quantitative easing.