With the main focus of last week a rather predictable decision on interest rates from the Bank of England (BoE) sterling enjoyed a rather more stable period on the markets than events in previous weeks had allowed. There was no direct mention of further 'unconventional' monetary policy, such as quantitive easing, in the announcement and so despite a brief wobble ahead of the release sterling maintained its levels and looked to finish the week unscathed. There was little other UK economic data of note and so investor confidence and risk aversion continued to strongly influence sterling's position on the market, closing the shortened week roughly 1% higher against the euro and fractionally down against the US$.
The Euro sits at €1.119/£1 inter bank and weathered a flurry of weaker-than-expected data releases in the early part of this week as Euro-Investor confidence, Retail sales and GDP figures all disappointed. Stronger Industrial production and German trade balance figures did help the euro to stop any significant rot but by the end of last week the euro was down against both sterling and the US$. Important European Consumer Price Index figures will be released this week and given the importance of inflation in the current recession this news will be pivotal to whether the European Central Bank will be able to resist making the cut in rates so widely expected from their last meeting.
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