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 € sits at €1.105/£1 inter bank. The European Central Bank met last Thursday and did as expected. They kept interest rates on hold and they announced the withdrawal of the dates for their short term funding facilities with this months 12 month offer being the last of this type and the 6 month offer in March 2010 being the last of this type. So the ECB has been much more effective than the Bank of England in detailing clearly how they will remove their equivalent of the BoE's quantitative easing programme. The euro initially benefited from this clarity gaining ground against sterling and pushing through US$1.50/€1 against the US$. However Friday's US non farm payrolls [effectively their unemployment figures] quickly reversed these gains. This week we have German industrial production data which is expected to show continued growth as the European economy as a whole recovers from recession.
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