Last week was “much of the same” for sterling – reaching a fresh five-year low against the dollar, and continuing to achieve multi-year highs against the euro. For a short period sterling had managed to reverse the trend against the US dollar and make some gains, but this came to an end as the US dollar strengthened and passed through the key support level of 1.50.
Another relatively quiet week lies ahead for sterling, with no major releases until Wednesday when we have key employment data released in the morning. Average earnings have shown a steady increase over the past six months, and wages are forecast to have risen by 2.2% year-on-year – meaning we could see a boost for sterling. After declining for five months in a row, investors will also be looking for a similar reduction throughout February in the number of people claiming unemployment benefits. These releases will provide the “warm-up” for the main event that day, when we see the Chancellor presenting the Government’s annual budget. With the UK election only two months away, investors will be listening for any news which may affect monetary policy.