UK economic news was limited last week and came in close to expectations. This meant that sterling tended to move based on news/sentiment from elsewhere. Against the euro and the US$ sterling continues to move in a narrow range between its highs and lows and it is a case of taking advantage when you see an appropriate level for your requirements. We are now in the heart of the Christmas retail period and it will be interesting to see how resilient the UK shopper is. Initial indications from John Lewis were positive but you do wonder if this will be mirrored elsewhere. This week we have the pre budget review by the Chancellor. The news has been full of how our beloved bankers are going to be taxed to the hilt but this is a side show. The key will be how the Chancellor with the twin problems of an up and coming election and the need to bring back government spending into line with its tax income. We also have the Bank of England meeting this week but this is not expected to result in anything unusual as interest rates and their quantitative easing programme are expected to be kept on hold.
The US$ sits at US£1.635/£1 inter bank. Last weeks movement was similar to the previous week. Even though the starting rate looked very similar to the closing rate, the exchange rate during the course of the week was far from constant. At the beginning of last week risk appetite grew and the US$ weakened by over a cent and half against sterling. We then had the US non farm payrolls [effectively their unemployment figures] on Friday which came in better than expected which seems to have confused the market as some believe it is a turning point and others believe they are nonsense. But the net result has been a rapid strengthening of the US$ against sterling and the euro. We wait to see if this continues into this week. The main economic news this week is the November retail figures. This should give a clearer view on the US consumers spending now that the “cash for clunkers” car scheme has ended.
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