The currency blog

Yesterday the spotlight was firmly on the Bank of England minutes in the morning and onto the Fed beige book in the afternoon. The BoE minutes cheered sterling into a rally against the USD over 1.66 and to 1.11 against the euro. The tone from the BoE although not conclusive was more hawkish and importantly there was no mention of expanding the Quantitative Easing programme. This facet was the impetus behind sterling gaining across the markets. In addition there is ongoing interest in GBP/USD by an oil company who are touted to be buying as much as £500 million each day supporting the rally to 1.66.

Yesterday afternoon we finally saw a breach of 1.50 for EUR/USD; however it did not last long as the Fed beige book release brought a sense of reality back into the markets. The disappointing feedback from the Fed beige book which offers a survey of economic conditions led to a dip in the Dow and some strength coming back into the USD in later trading. The feedback suggests that the economic recovery in the US could be prolonged and shaky.

Today UK retail sales data came in lower than expected with month on month sales coming in flat against the expectation of a 0.5% rise. This has taken the shine away from sterling after an impressive rally over the last few trading days. Currently the pound although dipping on the news is still above 1.10 on the euro and 1.65 against the USD and 150 against the Japanese Yen. Tomorrows GDP will now be the focus of attention for sterling.

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