Last week the Pound put in an impressive performance as upbeat UK employment and retail sales reports added to the brightening picture of the UK’s economic recovery.
Sterling broadly strengthened, rallying to multi-month and multi-year highs against several of its major rivals.
However, by the end of the week the British currency had pared advances as a result of slightly disappointing domestic current account data.
Losses against the Euro were limited however as the common currency came under pressure as a result of Standard & Poor’s decision to cut the European Union’s credit rating from AAA to +AA while maintaining the UK’s top ranking.
As European trading began on Monday the Pound was close to a two-year high against the US Dollar and was holding steady against the Euro.
Although UK news is thin on the ground this week, Sterling was supported by comments issued by Bank of England policy maker Andrew Bailey.
During an interview with The Telegraph the BoE official asserted that the central bank was prepared to take steps if it appeared as though UK house prices were surging too rapidly.
According to The Telegraph, Bailey commented; ‘We are watching the housing market very carefully. We’ve laid out the tools that we can use. We have set out our desire to see robust mortgage underwriting standards [and that] will be part of our approach.’
These comments did much to counteract concerns raised by business secretary Vince Cable regarding the government’s Help to Buy scheme.
The Pound was also deriving support from the fact that the rate of UK unemployment fell from 7.6 per cent to 7.4 per cent in the three months to October.
Last week’s stronger than anticipated employment figures have renewed speculation surrounding a potential timeline for the Bank of England raising interest rates.
Although the central bank has stressed that rates will remain at historic lows until at least 2016, if the run of encouraging economic data for the UK continues the BOE may have to revise its timeline.
Key UK data for the week ahead:
Influential economic data for the UK will be thin on the ground this week because of the Christmas holiday.
However, tomorrow’s UK Nationwide housing report will be of interest.
For the rest of the week market movement will largely be driven by Japanese and US reports.
Current Pound Sterling (GBP) Exchange Rates:
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.6344 >
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1955 >
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.8309 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9960 >
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6117 <
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8365 <
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5459 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5014 <
(As of 10:50 GMT)