A tough week for sterling
The pound has continued to drift around the lower end of recent ranges over the last week, further hindered by the news last Thursday that business investment in the second quarter slumped by 10.4%, the steepest fall since 1985. Even worse, the year on year reading was down 18.4%, the worst since records began in 1967.
Earlier this week, news that July’s encouraging return to growth in the manufacturing sector failed to extend for a second month saw sterling fall to a seven week low against the US dollar and hover around three month lows against the euro.
There were some concerns this disappointing manufacturing result could spin over into the important UK service sector PMI released earlier this morning but these have proved unfounded with a fourth consecutive expansion delivered on a 54.1 reading.
The pound is now staging a recovery on the back of a less buoyant dollar while against the euro, for now at least, the persistent probing of important support around €1.1250 has been met with staunch defence.
Looking ahead, it will be important for this £-eur level to hold up to prevent a breakdown of the 8-month positive trend. Against the dollar, the more than 5% fall over the past month has already undermined the bull trend which began in earnest back in March. Above 1.6575/1.6625 is needed to relieve some of the near term downside pressure which currently threatens to extend towards 1.60/1.58.
For more information please contact David Lamb, Head of Treasury Services at No1 Currency on 0131 561 8416
