GBP exchange rate spike short lived

Yesterday retail sales for the UK were released yesterday and were very positive.  This enabled the pound to make good gains against a number of major currencies. However, any hopes of a good spike in exchange rate were dashed when the Euro zone announcement for a bailout in Greece was announced.  Therefore, despite the strong retail figures the pound still lost ground against most major currencies. I believe that this is indicative of the fact that any longer term any sterling recovery will be sluggish. The main reasons for this are: 

  • The Bank of England may carry out further QE
  • Interest rates are likely to remain low for an extended period in the UK
  • Uncertainty surrounding a hung parliament and how the national debt problem may be dealt with
  • The UK is expecting huge public spending cuts
  • Continued poor economic performance – the UK is a service driven economy and reduced demand for our services is damaging the pound

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