Sterling continues to hang on

By Luke Dyson

As we move past the middle of another month, Sterling-Euro still manages to hang on and stay within its two cent range-bound market.

Although at present we are towards the bottom end of range, mainly due to sterling losing its footing following UK wage data being released yesterday.

Actual results were less than forecasted and sterling has taken a bit of a tumble. Average earnings including bonuses were down 0.2% from forecasted, and 0.4% down from previous. Average earnings excluding bonus was as forecasted, however again down 0.1% from previous.

This drop in UK wage data, providing it continues to fall, could drastically reduce inflation over the coming months, which then could result in sterling making some traction against the euro providing the Bank of England keep up with these changes and adjust interest rates accordingly.

Another key piece of data we were meant to see released yesterday was the unemployment figures, however the Office for National Statistics have delayed this till the 24th October. This data has some strength behind it and could move sterling in the short term depending on the outcome.

As of 7:00am this morning we have seen some key data. The CPI (consumer price index) figures were released, which is the indicator for inflation in the UK. Month on month was 0.5% above previous of 0.3% but also above forecasted of 0.4%.

However for CPI year on year the actual was 6.1% which is a drop from the previous of 6.2%, however it is not dropping as fast as expected with 6.0% forecasted.

This data is overall positive for sterling as inflation is dropping, however the pace its dropping is no where near the rate the UK is hoping for.

Given where the market is at present it is still potentially a very good time to buy euros, although the market is not at the top of the current range please do not let this potentially fool you into waiting to see if it goes higher. Sterling is still struggling and doing very well to hold its strength at present. If the market was to break out below the current range, this could be devastating for sterling as it could trigger the market to go in to a free fall down to the next support level or even further.

If you have an up and coming currency requirement please get in touch with your currency consultant today to get a strategy in place, even if you still have some time to work with before requiring your currency.