The currency blog

Over the past 72 hours the sterling euro rate has moved painfully little. The average range over the latter half of this week for this usually animated currency pair has been a mere 85 points, meaning that traders have either been waiting to buy or sell based on unforeseen economic data, or other markets have attracted their attention. This other market/currency is the US dollar. USD has taken a beating against both the pound and the euro on the back of poor unemployment figures, and in anticipation of sluggish growth going forward.
Mervyn King wil be speaking later on next week, and hopefully this will ignite interest in European transactions. UK financial earnings have been positive overall, and this may have helped to hold the pound at around the 1.20 level, but the pound will no doubt come under pressure over the course of the next trading week, and the markets will wait with baited breath to see what sentiment Governor King chooses to express. He will make a point of mentioning the level of lending to SME’s and individuals, and with banks such as RBS widening their profit margins it seems that pressure regarding capital adequacy is coming to bear and affecting borrowing criterion.
The Germans seem to be emerging from something of a lull which suggests that next week could prove euro positive up to a point; at least we should see some movement after what has been a distinctly uninspiring five days.  Interest rate remain the same which is unsurprising at this point in the annual cycle, however, speculation of the timings of a rate increase has genuinly split opinion leading to inertial in short term trades.

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