Will Bank of England testimony preserve the Pound’s climb?

Sterling has held onto yesterday’s gains as investors today await news of the Bank of England’s policy meeting with the UK Treasury Select Committee that began at 8.45am this morning.

Pound Sterling – UK Markets

Sterling has continued its upwards momentum of achieving five month highs against the US Dollar after yesterday’s retail figures added to the recent assortment of incoming positive data. These retail figures revealed that sales grew at their fastest pace in July for three years. Added to the growth figures from last week, which indicated that the economy grew twice as fast as expected in the second quarter, the mood has remained buoyant. Will this mood continue today? Much depends on the Bank of England meeting with the Treasury Select Committee currently in progress. This will address monetary policy and financial stability. Speakers will include Bank of England Governor Mervyn King as well as Andrew Sentence, who has so far been the single supporter of an interest rate rise. The outcome of the meeting may help UK recovery optimism flourish, should it focus on the gathering momentum of the economy. David Cameron, alongside other key figures from Government and business, has begun a two day trip to India. He hopes to strengthen relations and create jobs in the UK, with the aim being that India will choose the UK as its ‘partner of choice’. Downing Street has labelled this as the largest UK trade delegation in living memory as Vince Cable has also announced that British export of nuclear technology to India will be allowed for the first time, with the hope of providing an in-road for British businesses.

US Dollar – US Markets

The Dollar has continued to broadly suffer following yesterday’s poor consumer confidence figures that came in at 50.4 against an expectation of 51. In data releases today, durable goods for June will be watched for any further evidence of macro economic weakness in US recovery. Also today, mortgage applications and crude oil stocks change data may prove significant.

Euro – European Markets

The Euro has risen against the Dollar to near its strongest level in two months. It has lost out to the Pound overnight however and remains volatile so far this morning. The Euro was boosted by a rise in German consumer confidence earlier this week. European equity futures have also been pushed higher and the bond market is suggesting that the threat of the European banking crisis is ending. Attention is turning therefore to the increasingly likely sustainability of the recovery, also aided by the results of the European bank stress tests.

Other Currencies – Highlights

Speculation over the Japanese currency continues as unlike most of his colleagues and other officials, the Bank of Japan board member Hidetoshi Kamezaki has spoken out about the risks of a strengthening Yen to the Japanese economy. He has suggested that the bank will act to combat deflation – a more aggressive tact than mentioned by others. The Australian Dollar was dealt a blow as much weaker than expected Australian CPI data was released tempering expectations of any further rate hikes in the near future. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.