Sterling Strength
Sterling has good week.
The pound strengthened to the best levels in some time against the Euro yesterday due to weak Euro Zone data. The EU manufacturing and service industry contracted for an eighth straight month in January while confidence in the EU economic outlook dropped to a new low in December.
“We’re very carefully observing all incoming data”, Jean-Claude Trichet, president of the European Central Bank said. “This year is in the negative territory and even more in negative territory than our last projections” he added. Meanwhile, the International Monetary Fund yesterday cut its forecast for the EU economy predicting a contraction of 2% this year, against a previous estimate of only 0.5%
Trichet, speaking at the World Economic Forum in Davos went on to indicate that interest rates in the Euro Zone, currently at 2% an all time low, may have to be cut further in March. Trichet did state that he wanted to avoid following the FED in cutting rates to “very very low levels” however, recession in the Euro Zone has forced the ECB into its most aggressive series of interest rate cuts in its 10 year history.
Although we saw Sterling rally yesterday due to these comments there is no guarantee that this strength will last. Geraldine Concagh, economist at AIB Group Treasury stated “Sterling has bounced back from very low levels but it still remains extremely vulnerable… I don’t think we are at the start of a large rally.”
Soros Profits Again On Sterling Weakness
It emerged yesterday at the World Economic Forum in Davos that George Soros had been betting on Sterling to weaken and had made a healthy profit from the pounds recent decline. Soros shot to fame when he famously bet against the pound resulting in the UK being forced out of the ERM (Exchange Rate Mechanism) in 1992.
What is interesting for those who have a currency requirement is that Soros is now undecided as to the future of the pound stating yesterday that the pound will “continue to fluctuate” as it has done in recent weeks. So, if the man who has more often than not been correct on second guessing the fortunes of the pound is uncertain on how it will fare over the coming months is it worth holding on to see if the pound will get stronger?
Todays data
All UK Data released this morning a few minutes ago at 9.30:
Mortgage approvals - 31000 new mortgages in UK. only 26000 expected. Good for Sterling
Consumer Credit - figures slightly worse than expected
The above data has caused some further Strength for the pound. At the time of writing:
GPP/EUR 1.1130
GBP/USD 1.4333
GBP/CAD 1.7644
GBP/AUD 2.2263
GBP/NZD 2.7960
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This is a brief summary of todays report. Click here to read the full report on our main website
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