Sterling gains over euro continue

This morning the pound has made some small gains vs. the euro but is continuing yesterday’s downward trend vs. the US dollar.  The Irish bailout remains the key market mover as we see a flight to the safe haven USD. 

One release that could change this trend is the CBI (Confederation of British Industry) Distributive Trades Survey due out at 11am this morning.  This is an indicator of short-term trends in the UK retail and wholesale distribution sector.  At this time of year it is particularly poignant as in the lead up to Christmas retail sales are vital to the UK economy.  If we see a high reading, you would expected to see the pound strengthen as this is good news for the UK economy and subsequently for sterling.  This could result in GBPEUR pushing up toward the 1.19 mark.  Obviously the other side of this is that a poor figure could see sterling weakness, good news for anyone who has foreign currency to sell.

The markets will be keeping a close eye on this release as it can often have an impact on the formulation of economic policy at the Bank of England and within Government.  With QE (quantitative easing) still a possibility for  the Bank of England and the VAT rise on the horizon for the Government, any unexpected release could cause problems for either party.