More losses for sterling
13 March, 2013
A miserable few weeks for the Pound continued yesterday with some very poor industrial production and manufacturing data, which showed that despite the government’s renewed aims for growth, with the car manufacturing sector highlighted as one of the UK’s success stories, we are still struggling very significantly to turn things around.
The Pound plumbed new lows against both the Dollar and the Euro, with many market analysts asking if we are in a complete tailspin – “We still find that GBPUSD should fall to 1.4200 by early-3Q’13” explained Christopher Vecchio, Currency Analyst at DailyFX.
The Bank of England certainly seems to be helping Sterling on its way down with many experts suggesting a desire to boost the UK’s export market, and hence boost those industrial and manufacturing numbers, could be their ultimate gain. What seems certain is that further Quantitative Easing is in the pipeline, with speculation also mounting that George Osborne could use the upcoming budget to change the Bank of England’s remit to allow further QE despite above target inflation.
Despite all of this UK doom and gloom it must not be forgotten that the Eurozone is in deep recession and the US needed a marginal upward revision to turn around a negative growth figure for the end of 2012 as well. The markets seem to have a much more positive sentiment towards both of these areas, hence their relatively stronger currencies, but market sentiment can change very quickly and there are many analysts who believe that the Pound is artificially low and has been oversold, and that any negativity in either the Eurozone or the US could spark a sharp turnaround.
Both the US and Eurozone have a lot of data out in the next 2-3 days – including retail sales, CPI inflation and industrial/manufacturing numbers, so watch out for any clues and stay in close touch with your CI account manager.
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