Sterling had another mixed week last week. It gained a bit of ground against the € and lost a bit of ground against the US$. UK economic data released was variable with employment data surprising to the upside and November retails sales to the downside. We are now in the final throes to Christmas, a key trading period for retail worldwide and especially in the UK. The expectation is that retail sales will be ahead of last year and this is very important for the UK retail industry which has had significant problems this year and key to showing that the consumer is recovering from a very tough year. I think most of us will be looking forward to putting 2009 behind us and a much more productive 2010. This week we have the release of updated third quarter gross domestic product figures which are expected to show us still in recession but closer to being out of it that the preliminary figures first showed. This would be helpful for sterling showing that we aren't lagging the rest of the world as badly as first shown.
During the week we had a range of poor set of economic data out of the euro zone. This made the markets realise that the euro zones economic problems were far from over. One set of data showed that after five months of expansion industrial production fell in October by 0.6%. Then a survey of German business confidence came in lower than expected which was the third monthly fall in a row and further concerns are being raised with regard to the banks in the euro zone and the possibility of further bad debts and the need to raise additional capital. So a distinct wind change for the euro which has lost 5 cents plus from its recent high against the US$.
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