Sterling had a mixed week last week, holding its own against the €, gaining against the US$ and losing ground against the commodity backed currencies. Mid week the Bank of England released its quarterly inflation report which showed that inflation was unlikely to reach the target rate of 2% for a number of years. The report did show that the BoE was expecting an improved growth in the UK economy over the coming years than previously forecast. The overall reaction of the market was sterling negative especially when the Governor of the BoE decided to comment. He highlighted that the major concern remained the spare capacity that exits in industry and the labour markets. But by the end of the week sterling had managed to reclaim lost ground against the € and the US$. This week we have the release of retail and inflation data for October. Retail sales are expected to show a modest increase and inflation an increase and continue to be over the 1% level on the back of increased food and energy prices.
The US$ sits at US$1.673/£1 inter bank. No significant economic data released in the US last week and the US$ seemed to track the equity markets and therefore risk appetite/aversion. At one stage the US$ hit a 15 month low against a basket of leading currencies. The US weekly jobless claims showed that the US economy was slowly moving forward as previous growth figures had shown but the Fed continues to shout from the hilltops that it is a slow road to recovery. This week we have the retails sales and inflation figures for October. Retail sales are expected to show an improvement over last month. It is the comparison with last years which shows a year on year fall close to 6%. Inflation figures are expected to show the same trend, an increase over last month but deflation over 12 months.
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