Sterling Rebound Continues

by | Apr 24, 2015

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Neil Davies, Head of Trading at PlutusFX, continues to look at Sterling:

Sterling leaped forward yesterday breaching the physiological level of GBP/USD 1.5, peaking at 1.5079 and today continuing to trade around the figure.

The fuel has come from the release of the Bank of England minutes. Unsurprisingly, there was a unanimous vote to keep rates on hold. However, whereas in the past there has been the potential of extra stimulus, the direction now is pointing with some certainly for the next move, albeit at a much later date, to be a rise in rates. The committee thought it was unlikely that economic growth could continue at its current pace without generating price and wage inflation.

Clearly that forecast must be for a later date as figures released today showed a fall in retail sales in March. Q1 2015 show an annual rise in sales of 0.9%, compared to 2.2% in Q1 2014. It would therefore appear that despite wages now rising ahead of the zero % inflation we have, consumers are still being careful about their spending.

Looking very much like a Japanese economic model!

The current coalition will be more pleased with the PSBR figures released this morning, which show borrowing in March stood at £7.4bn, giving a total for the financial year of £87.3bn, £11.1bn lower than last year and nearly £3bn below forecast.

At least if Labour do succeed in gaining power, they won’t have a note left for them saying that all the money is gone.

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