Sterling is moving in a fairly narrow range against a wide range of currencies. It is the speed of movement between the extremes of this narrow range which makes it difficult to assess when best to do a transaction. The key UK releases of last week were firstly the Bank of England minutes and secondly the level of government borrowing for October. The BoE minutes identified that 7 of the 9 members of the BoE committee voted for an increase in the quantitative easing programme by £25bn to £200bn. The expectation now is that any further increase, if any, will probably have to wait until February 2010. The other point discussed by the BoE was reducing the rate at which the BoE pays interest on funds deposited with it but they decided against this. The market view is that this is quantitative easing by the back door so became slightly disconcerted they even discussed it which is always sterling negative. The level of government borrowings increase in October exceeded £11bn. Just shows the extent of the problems facing the government. Although there was a lack of positive news last week sterling didn't crumple. This week there is a paucity of UK data released. We will have some housing price data released and an update to the preliminary third quarter figures. The preliminary figures on growth surprised to the downside and showed we were still in recession. The expectation is a slight positive revision but not enough to move us into growth
The US$ sits at US$1.658/£1 inter bank. There was no unexpected economic news from the US last week and for the 101st time the Federal Reserve stated that US interest rates were going to be held at current low levels for the foreseeable future. What was unusual though was the Chairman of the Federal Reserves comment that he favoured a strong US$. This was unusual as he very rarely comments on the US$ as this is the remit of the US Treasury. Therefore the market took note and we saw the US$ benefit during the course of the week. This week we have a raft of US data including an update on third quarter growth figures, October home sales including new homes, personal income and consumption spend for October and initial jobless claims for November. So a busy week which will give our beloved economists plenty to talk about.
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