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 euro continues to be strong against most currencies and sits at €1.107/£1 inter bank. . The European Central Bank sees the euro zone economy to be on the up and is expected to increase its growth forecasts for the euro zone for 2010 to be released in December. But they know they have to be ever vigilant. Inflation seems to be increasing but will take quite a while to reach the targeted level of 2%. This week we have the data released which includes data on manufacturing and services to show a continued improvement in business and consumer confidence.
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