F/X weekly comment

Not that I'm shouting about it, but have you noticed (Richard) that my forecast has been spot on for two consecutive weeks now? That just about doubles my success rate for the year. Sterling had a day off from its woes on Friday. Something to do with the Sovereign taking a day off for a wedding, but earlier in the week there was some action.

Growth, of sorts

The UK GDP figures came out this week for the first quarter of 2011. The 0.5% increase makes up for the poor 4th quarter but to all intents and purposes means that the UK has not grown at all in the past 6 months. The figures showed a rebound in transport since the destruction caused by the winter snow while services and manufacturing and services have remained buoyant. The main problem remains construction, a historically volatile aspect. Mortgage approvals published at the same time as the GDP release show a rise for the 3rd consecutive month.
The pound rose quite sharply after these figures. It seems that there was a lot of market expectation of even worse figures, so positions had to be reversed. This strength didn't last long though.

Same old Euro

The Euro is starting to remind me of a gritty Mexican lightweight boxer around in the eighties. I can't even remember his name, but he always impressed me in the way that he never knew the meaning of defeat. No matter how badly a fight was going, he simply wouldn't give up. I think he retired unbeaten. Either that or he was beaten senseless due to going up too far in the weights.
The Euro has a similar sort of charmed life at the moment. No matter how bad the PIGS problem becomes, or looks like developing into, it hangs in there and keeps on taking the punches and coming back for more. After a while you have to be impressed by that.
Within a day of the sterling show of strength after the figures, the Euro had taken back all the lost ground, and here we are back below 1.13 again. It may have had something to do with Yves Mersch, an ECB board member, speaking publicly about the likelihood of the central bank reigning in their asset purchase scheme in the near future, an action which would see further support for the Euro.

Either way, I can't see much changing in the coming weeks, so I think we will still be in the 1.12s this time next week.