Sterling, which has had a bad August, lost further ground last week as the fallout from the minutes of the Bank of England's (BoE) last meeting highlighting their intention to expand quantitive easing whatever the affect on sterling continued to rumble on. A very marginal improvement in UK GDP figures last Friday did nothing to support sterling having already lost roughly 4% against the euro and the US$ in the past 4 weeks. Given that the BoE are not due to meet again until the 10th of September and very little significant UK data due out next week, sterling may well find itself in this lower trading range until there is a new development or perhaps a change of strategy from the BoE. However, amongst all this gloom the expectation for the UK to return to growth during quarter 3 of 2009 is positive and brave and unpopular decisions are often needed at times of crisis.
Confidence within the Eurozone is definitely on the up for having seen France and Germany leave recession by reports released in recent days. The euro sits at €1.139/£1 inter bank. Specific information last week regarding German inflation which was slightly better than expected helped the euro to extend the previous week's gains against sterling and close the week up against the US$ also. However, as with the UK and the US, inflation is expected to remain under the target of 2% and so any chance of seeing a hike in interest rates from the European Central Bank seems very unlikely before the end of the year. This week we have Eurozone unemployment figures and again it will be interesting to see how this lagging indicator is faring.
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