Some much-needed cheer for sterling

Sterling shorts have scurried for cover this morning after some healthy macro news and a positive response to David Cameron’s speech on Britain in Europe. The jobs figures were another surprise, employment up 90K in the three months ended November and the unemployment rate dipping to 7.7%. Also, the latest MPC Minutes showed that a number of members did not see the need to engage in more asset purchases at this point.
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23/01/2013 @ 10:09 GMT

Sterling's slippery slope

Evident once again today has been a further decline in sterling, especially against the newly-anointed favourite major currency, the euro. Since the start of the year, the single currency has appreciated a further 2.5% against the pound, with the EUR/GBP cross now above 0.83; six months back, it was below 0.78. In truth, sterling has looked soggy for some time, without that translating into significant underperformance. However, the adverse price action has become more apparent since the start of the year.
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14/01/2013 @ 14:10 GMT

Some fresh problems for the pound

With the spotlight very much on the euro over the last few months, the pound has been under the radar for some time now. It quietly attained a fresh 16m high against the single currency overnight; it has attracted some capital inflow from the Continent into both gilts and London property from investors keen to reduce exposure to the troubled euro; and at times it has even been spoken of as a safe haven. Despite the country’s dreadful fiscal predicament, the 10yr UK gilt yield is now just above 2.0%.
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09/01/2012 @ 11:19 GMT

Politics could hack the pound

For quite some time the major driver of the pound’s weakness has been the parlous financial condition of the UK economy. The combination of declining real disposable incomes, unprecedented fiscal austerity and elevated government and household debt has resulted in the most severe contraction in private sector demand for decades. With the Bank of England debasing the currency through its asset purchases program, it is little wonder that sterling has depreciated significantly. The pound is easily the worst-performing major currency over the past three years.
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18/07/2011 @ 10:16 GMT

The scourge that is UK inflation

The country is in the grips of unprecedented fiscal austerity, and the private sector is in recession, but unfortunately the scourge of inflation is still ever present. In the month of June, producer input prices rose another 0.4%, up an eye-watering 17% in the past year. Producers are having some limited success passing through these much higher input costs, with output prices up 5.7% in the year to June. To add to the misery of inflation, British Gas announced that it would be raising prices by a further 18% next month.
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08/07/2011 @ 10:59 GMT

FOREX: More slippage for the pound

It has been very gradual, but the pound has been sliding consistently over recent weeks. Cable now appears destined to remain under 1.60 for a while after penetrating that level yesterday, while EUR/GBP reached 0.8960, the highest since early April. Given the continuing sovereign debt dramas being played out in Europe over recent weeks, the underperformance of sterling is disturbing. For the quarter-to-date, the pound is the worst-performing major currency, with a loss of 0.4% against the dollar, a 1.5% decline vis-a-vis the euro, and a double digit percentage fall against the Swiss franc.
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28/06/2011 @ 10:00 GMT

FOREX: UK fiscal messages are mixed

The latest government borrowing numbers have put some downward pressure on the pound, although right now the reaction looks a little overdone in an FX market that appears moribund ahead of the Greek confidence vote late this evening. These numbers are always ‘lumpy’ month-to-month so it never pays to read too much into one month’s figures. The May figures are only the second of the new fiscal year and, once you strip out the impact of financial interventions, there’s been just a modest improvement in the overall borrowing position.
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21/06/2011 @ 09:34 GMT

A critical time for the euro

The first few trading days of the new year have been wobbly ones for the single currency, with the euro already down 2% against the dollar and 1.4% vs the pound. Interestingly, the euro is doing better against last year's star performers such as the Swissie, the Aussie and the Japanese yen, helped by some healthy demand from Asian central banks. That said, the euro is looking decidedly vulnerable against the resurgent dollar and pound.
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06/01/2011 @ 08:44 GMT

Rising inflation expectations should worry the MPC

One of the concerns that many observers had regarding the extended period of elevated inflation in the UK was that it would ultimately result in raised inflation expectations. Well, there is now unambiguous evidence that this is happening. According to the latest YouGov/Citi survey, inflationary expectations for the year ahead rose to 3.5% in December, up from 3.3% in the previous month and 2.7% back in July. This in one development that the Bank's policy-makers will take notice of.
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04/01/2011 @ 12:00 GMT

UK recovery remains resilient

The UK's manufacturing sector continues to register positive surprises. In December, the manufacturing gauge produced by the Chartered Institute of Purchasing and Supply rose to 58.5, from 57.5, the highest reading since 1994. This survey is consistent with other recent reports which indicate that the manufacturing sector is benefitting from the strength of foreign demand, the competitiveness of the pound, and respectable demand at home.
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04/01/2011 @ 09:44 GMT