The UK and Sterling seem to be going from strength to strength recently with more and more positive data coming out of the UK but will this Sterling strength continue? In my opinion I think there is a major possibility. Sterling has come a long way since hitting a low point after the UK lost its coveted AAA credit rating when GBP/EUR hit a year low of 1.1370 and GBP/USD went as low 1.48. As it is now GBP/EUR is sitting much prettier with the Interbank rate currently around 1.1850 and GBP/USD up just over 1.54. When UK Gross Domestic Product (GDP) figures were released two weeks ago we saw that the UK economy had grown by 0.3% in the first quarter of 2013, much better than expected and giving the pound a hefty boost as confidence oozed back in to the UK. Whilst the UK still has a poor growth outlook for the remainder of the year and we may not reach the highs of last year I still believe we could break through the 1.20 barrier with regards to GBP/EUR in the near future and possibly up above 1.56 with GBP/USD, even against a strengthening US economy. With better than expected Manufacturing, Construction and Services data coming out recently for the UK I just think that as long as these sectors of our economy keep on growing, Sterling will rise with them.
This is however my opinion and markets are prone to surprises, as the saying goes….’expect the unexpected’. There is a lot of uncertainty surrounding the Eurozone at present so if any of this can be resolved and a more positive outlook can be found then the Euro could find itself fighting back once more. As mentioned previously the US is a strengthening economy. Whilst this may be slow growth, it is growing none the less and this could create a tug of war between Sterling and the greenback.
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