Sterling has dropped sharply over the weekend against the Euro but moved in the opposite direction on the US Dollar gaining in strength. This matches the weekly trend with the Pound now 0.99 percent lower on the Euro and 0.96 percent higher on the US Dollar than a week ago. The economic impact of the Japanese earthquake and following intervention by the G7 to weaken the currency is being closely watched and there is continued uncertainty with regards to the UK recovery and when an interest rate will or will not occur.
Meanwhile the Euro has hit a four month high against the Dollar and continued to climb against Sterling as expectations rise for Europe to agree on details of increasing the bailout fund at the EU summit this Thursday.
The summit is aimed at soothing fears over European debt issues, so despite the perceived weakness in several Euro zone nations, the currency is continuing to strengthen as leaders are portraying a sense of unity in dealing with this. This is alongside the key issue of whether European interest rates will rise in the very near future which is also pushing the currency higher.
Markets have picked up on the comments in the foreword to the Bank of Englandââ¬â¢s quarterly bulletin released today from chief economist Spencer Dale. Dale wrote that the pace of policy tightening in the UK and abroad was expected by markets to be faster.
Today will sees a wave of UK data in the morning with consumer price index, inflation, retail sales as well as public sector net borrowing having the potential to bring volatility. The inflation figure will be particularly scrutinised following its surge to 4 percent last month, twice the Bank of Englandââ¬â¢s target level.
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