Sterling finished the week in less than convincing fashion, giving up ground against most trading partners, as investors flowed out of risky currencies and equities over the day.
Early morning news from Lloyds banking group that it would be returning to profitability over the year sent UK and European banking stocks soaring, helping the pound to hold its own in early trading.
However, afternoon news that the Reserve Bank of India had raised interest rates surprised the market. In a slight reversal of the early week trend towards commodity linked currencies some profit taking was seen as investors flowed back into the dollar. Equities moved back from their high’s across the globe also
Andrew Sentance also leant on the pound with comments revealing he believed that there was “some risk of a double dip recession”. With growth appearing to be almost nonexistent in the UK, and whatever government is elected looking likely to move towards withdrawing some level of stimulatory measure there is always the possibility of this occurring, building pressure on the pound
Looking ahead today the data calendar is light, however there is plenty of challenges for sterling over the week. Inflation figures arrive tomorrow, as do retail sales later in the week. Wednesday sees Chancellor of the Exchequer Alistair Darling revel his budget for 2011, while US GDP figures on Friday will also move the dollar around.
