Lots of news affecting sterling over the past week- some good, some bad. The mixture of data and sentiment led to lots of swings in the fx markets with the pound hitting a new 2009 year high at 1.1876 and also retesting the lows of the current range at 1.1625.
At the beginning of the week the CBI (Confederation of British Industry) commented that the recession will be shorter and less severe than previously expected. The CBI believes that the pace of contraction will moderate by the end of this year and moderate growth will materialise early next year. They also scaled back their forecast for unemployment from 3.2m to 3.03m by the second quarter of 2010. However it warned that the recovery would be “slow and gradual” and it would take time to judge whether recent good news will turn into sustainable growth in the economy.
The euro was not affected through economic data but more through sentiment. IMF’s Strauss-Kahn has re-emphasized concerns over the budget situation in Latvia, he said “The IMF is especially concerned about the fact that the necessary measures which have to be undertaken to fix the important budget deficit should not hurt the poor, primarily.” Escalation of budgetary concerns in Latvia will weaken the euro as the market fears banking issues in Latvia and Eastern Europe are yet to be fully disclosed. Onto the positive news for the euro and German business expectations rebounded from a record low as the outlook for export sales steadied- this helped the euro remain firm against the USD.
Overall we have finished the week over 1.18 and sterling continues to hold respectable levels across the markets, this bodes well for the technical strength of the pound and could see it form a base for a move towards 1.20. Even in the light of mixed data and cautious sentiment in the UK, the pound will continue to gain on improving global conditions against the euro and the USD.
More Great update from Keith Spitalnick Currencies Direct,
Thanks Keith for keeping us in touch.
