Sterling posted gains vs the single currency, with the market forecasting no change in MPC policy

Having hit a fresh six-month low against the single currency in early trading , the pound rebounded yesterday, to close up half a cent at 1.0864.

  • Unexpectedly weak data in the UK manufacturing industry on Tuesday continued to weigh heavily on the pound, dragging sterling to a 6-month low of 1.0781.
  • With little data out in either the UK, the eurozone, or the US yesterday, markets initially continued to take direction from Tuesday’s data, which supported sterling selling.
  • The euro trimmed its gains though following the second quarter final GDP figure for the eurozone, which was revised downward from a contraction of 0.1% to 0.2%, dampening the broadly positive sentiment towards the currency.
  • In trading today investors will be listening carefully to both the MPC and ECB’s respective rate statements for clues to future rate movements.
  • Both central banks are expected to keep interest rates at record lows, however analysts have noted that the BoE, in light of recent economic data, may hint at extending their asset purchase scheme before the year’s end, which could greatly weaken the UK currency.