Sterling Stays Strong (SSS)

5 September, 2013

Simon Eastman

The pound continued to hold firm yesterday following its recent rally as the UK services PMI posted a higher than expected improvement, giving its best reading since 1997! This follows suit to the manufacturing and production PMI figures from earlier in the week which also posted above expectation. The reading helped to keep the pound buoyed across the board especially against the euro which wasn’t helped by all European data releases such as retail sales, PMI and GDP which all came in lower than forecast.

Trade balance in the US came in lower than expected which in turn caused investors to become less risk averse, putting money into the safe haven US dollar. This saw the pounds rally halt in afternoons trade as sterling is seen as a riskier currency compared to the ultra low interest yielding greenback which made gains instead. After the drop at lunchtime, the pound traded fairly flat until close, but still at levels not seen for some months against all the majors.

One exotic worth noting is the Indian Rupee, which after a request for bank intervention among its fellow BRIC countries in the quest to have a united bank for these emerging regions, has dropped some 25 percent in a few weeks. The levels available for sending money to India are phenomenally good at present, best in well over a decade!

This morning the pound is faring well again, up at the levels we saw before lunch time yesterday ahead of central bank meetings in the UK and the EU. The Bank of England meet at 12pm and the ECB at 12.45 with subsequent press conference afterwards where we can see markets change with every question and answer given. So beware, anyone looking to send money to Europe in the coming days, as any positivity towards theEuro or mention of “forward guidance” will almost certainly dent the gains we have seen recently. It might be worth having a chat with one of our brokers this morning to avoid any risk of missing out on these five month high levels.