Sterling still under pressure
4 March, 2013
There may be hints of spring in the air, but we are still seeing dark days for the Pound. The upcoming budget, due on March 20th, is the main financial event this month, and unless George Osborne can pull a rabbit out of the proverbial hat, it may be a while before there is any significant improvement for the ailing British currency.
This week is the first full week of March and we have the usual data releases including interest rates in the UK, which will almost certainly stay on hold, at the same time as Quantitative Easing which may be extended. The Bank of England committee last month only narrowly voted to keep the current QE limits in place as opposed to increasing the asset purchase facility, and if they do so this month we would be likely to see the Pound fall. QE dilutes the currency and has always hurt exchange rates in the past – something which the Bank may not be too worried about, given the boosting effect that a weaker Pound gives to the UK’s struggling export industries.
In Europe the aftermath of the unexpected Italian election result may give some Euro weakness. Mario Draghi’s press conference on Thursday after the Eurozone interest rate decision will be of great interest, and we also have retail sales (today) and GDP (Wednesday) out in the single currency area.
The main American data is Friday’s non-farm payrolls, the main monthly labour market figure, which is released at the same time as Canadian unemployment.
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