Sterling winning, but for how long

17 July, 2012

Graham Harborne

New 3½ year highs were again seen yesterday for the GBP/EUR pairing as eurozone concerns continued to weigh on the 12 bloc currency. We have yet to see any sort of sustained rally but we do keep seeing further strength seemingly on a daily basis. With the Italian and Spanish banking sectors being the main concern, at least for now, it appears that any leaked reports of what may or may not happen are creating volatility in the markets and I suspect unless we see some concrete proof of how the problems are going to be resolved this pattern may continue.

Against the USD the pound also rose as weaker than expected US retail sales led to further speculation that the Fed may have to follow the BoE’s stance and add further QE but the question of when this will or will not happen remains very much in the air.

So in summary the pound has been winning the currency battle against its 2 most common pairs, the euro and the USD, but one important thing to remember is that this is all on the back of data and rumours coming from Europe and the States. The remainder of the week sees a string of UK data releases and we must remember that only a few months ago we slipped back into a recession and poor data will compound the fact that we are not much better off than our friends overseas so do not be surprised if the sterling strength we have seen in the past few days is quickly erased.

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