The currency blog

Sterling has pushed up to over 1.18 against the euro and just over 1.68 against the US dollar. Sterling was helped by improved housing data and better than expected banking numbers and results from UK corporations including BT and Cadbury. Second quarter GDP data in the US was also better than expected as GDP fell by 1% in the second quarter against an expected 1.5%. This helped comfort the markets, weaken the USD and continue the bull-run in equities. We have now shifted into a higher trading range against the USD after breaking above 1.66 finally.

Barclay’s results showed that first half earnings rose 10% and net income came in at £1.89 billion from £1.72 billion a year earlier. This is below median forecasts but still strong numbers- we have Lloyds and RBS later in the week.

One particularly big event risk for GBP/USD comes later in the week in the form of the latest Bank of England MPC meet. Rates are almost certain to be kept on hold, but it’s what the bank does regarding quantitative ease that matters.  This could stem the sterling bulls as we approach the decision on Thursday.

German retail sales for June have come in at -1.8% month on month, -1.6% year on year, demonstrably weaker than median forecasts calling for rises of +0.5%, +0.9% respectively. This has helped the pound test the 1.18 level.

Discuss on this on the Currency Exchange Forum