Sterling had a good week gaining ground against most other currencies. A few reasons for this. Firstly a recovery from what is viewed as an over reaction by the market to poor UK gross domestic figures on the previous Friday. Secondly the UK data last week was reasonably positive with increasing house prices and improving consumer confidence. This week we have the Bank of England meeting. The market will await with interest their announcement on the quantitative easing programme and whether or not they are going to increase the total amount from £175bn. Last time they increased the amount it was very negative for sterling and common sense would say the same would happen this time, although it has to be remembered that common sense doesn’t always apply in the currency markets, especially as other countries such as the US are looking to stop their equivalent programmes. So we wait to see what happens on Thursday.
The US$ had an up and down week. It now sits at US$1.635/£1 inter bank having at one stage hit US$1.66/£1. The US economy is, apparently, out of recession having posted an increase in gross domestic product in the last quarter. The initial reaction to this was very positive and led to the fall in the US$ as the markets risk appetite increased. Then the data was analysed which lead to a fall in risk appetite as the realisation came through that the Federal Reserve and the US government couldn’t keep on pumping money into the US economy for ever. This week we have the US unemployment figures. These always lag any recovery so it will be the rate of increase that will be scrutinized to see if the economy is really on an upward trend.
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