Weekly F/X comment

Back in France at last! It's lovely to visit family and friends; check out your old local; do the tour of ethnic restaurants, and 'shop for England'. It is also very hard work, very tiring, and makes you put on weight. Throw in a corporate trip to Berlin at the end and things get even worse. Still, you can't have everything, can you?

Back on track?
I also feel better about sterling this week. The fall down into the 1.16's came as a nasty shock to me and I suspect a good few others, but last week I started to look for some 'reasons to be cheerful'. Let's face it, if Ian Dury could do it, so should we all.
We are at 1.1860 at the moment. I was looking for a consolidation at 1.1725, but I'm more than happy to see us here, and I'm now looking for another go at the 1.2000s.

Sterling up
The markets worst fears about the preliminary GDP figures seem to be dissipating. The pound was boosted by a return to growth in the construction sector in January.
Currency strategists are now saying that the better than expected construction figures add fuel to the interest rate hike lobby. The construction data follows similar positive news from the manufacturing sector, which showed UK manufacturing in January expanding at its fastest rate since 1992.
House prices also rose more than expected, and on Friday the services sector shrugged off December's snow problems and posted an impressive PMI figure. Still too early to tell, but it is beginning to look as though fears of a double dip recession were overdone, and we can expect a good revision to those awful fourth quarter figures.

Euro down
markets are starting to focus on Europe's problems again. The ECB not surprisingly left interest rates unchanged again this week. Then in his after - decision press conference M. Trichet tried his usual tactic of warning of the need for vigilance and future interest rate rises. The aim here is to get the benefit of an interest rate hike without actually having one. This time however the market called his bluff, and started selling the euro. A rate hike while the PIGS are still in such dire straits would be suicidal. Subsequently the euro lost its recent strength against the dollar and sterling, sliding by over a cent against both. The single currency was not helped by a poor Spanish bond auction or weak German retail sales either.

OK, time for me to put my money where my mouth is. Thank goodness I never have to do that! Where for sterling next weekend? 1.2000 please, and quick about it...