Sterling maintained its "steady as she goes" stance although there have been a few waves along the way. First was the open letter from the Bank of England to the Government explaining why inflation was over 3% when the target was 2%. The problems are that the main factors affecting inflation, energy and food costs, are outside the BOE's control while at the same time the UK economy is suffering. Therefore trying to bring UK inflation under control by significantly raising UK interest rates is not really an option. Then the minutes of the last BOE meeting were released which showed that one member of the committee had voted to reduce UK interest rates. Then the UK retail figures for May were released which showed a 3.5% increase against a forecast fall which was much higher than expected. So by the end of the week we seemed to be back to where we started which is reflected in most of the exchange rates.
After the previous weeks rhetoric a bit of a reality check for the US$ as it lost ground and it now sits at US$1.966/£1 inter bank. The US economy is not doing well, house prices continue to fall and unemployment is on the rise. A lot of US companies are seeing their earnings forecasts cut significantly. However, sterling has very similar problems and as such any gains made by sterling one week could very likely be given back the following week.
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