Sterling is on the soft side once again this morning, with EUR/GBP sustaining the move above the 0.80 level that was seen at closing yesterday. The softer tone is also evident against the dollar, with cable having briefly dipped below the 1.61 level in early trading before staging a modest recovery thereafter. The PMI data seen this week for both the manufacturing and the service sector (falling from 53.7 to 52.2) seem to suggest overall that the economy probably returned to expansion in the third quarter, but only modestly so judging by these latest numbers.
On the charts, sterling is starting to look a little tired - especially vs. the dollar - with this shaping up to be the third failed attempt at a sustained push above the 1.60 level this year. Of course, it’s just as much about the dollar as it is sterling, with the US currency having reversed the weakening trend seen in the run-up to the QE announcement last month. The Bank of England’s meeting this week is not expected to result in any policy announcements, but the current tranche of bond purchases (quantitative easing) will have been completed by the time of the BoE’s November round. Some are suggesting that further QE could be announced then, but this is likely to depend in part on the success of the current round and also of the Funding for Lending scheme that was started in the summer. It still boils down to timing though, with further QE from the Bank looking likely in the coming few months.