Sterling has managed to rally after several days of losses due to weak UK data and fears that the global economy may slide back towards recession. Yesterday sterling was 4 cents lower versus the Euro compared with a couple of weeks ago. Very low inflation figures have changed market expectations on UK interest rates in that the Bank of England are not expected to raise rates until Summer 2015.
Whilst unemployment has dropped below 2 million in the UK for the first time since 2008, and average earnings rose, they rose by lower than the rate of inflation meaning prices are rising faster than peoples earnings – again another big potential problem for the UK. Next week we have the Bank of England Minutes and GDP revisions, so these will need to be a little more bullish if the pound is to claw back significant ground.
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