Last week was epic for sterling. The $EURGBP rallied to new highs above the psychologically important 0.8500 level. The $GBPUSD, $GBPNZD, $GBPAUD, and $GBPCAD all fell to fresh 2013 lows early in the week heading to the Bank of England minutes release. However, when the BoE minutes revealed that it was ready to end quantitative easing and unemployment in the UK fell to new lows, sterling rallied off the lows. In fact, thank in large part to the Bank of Japan, the $GBPJPY rallied to its highest levels in over 2 years. Despite policy makers in the BoE calling for an end to QE, the economic realities of the UK may not allow that to happen. And since BoE meeting minutes are backward looking, sterling may not be able to sustain its Friday gains in this new week of trading. With a very light economic calendar from the UK this week, expect sterling to trade very technically and at the whims of the USD with the $FED rate decision looming mid-week.
- George Osborne’s austerity plan ‘risks lost decade’ for UK economy (The Guardian)
- December jobless falls to lowest since mid-2011 (Reuters)
- Did Sir Mervyn King just say something rather radical? (ITV News)
- Trends in Real GDP By Economy Since 2008Q1 (Markit Economics) [chart]
- UK GDP shrinks by 0.3% in fourth quarter: what the economists say (The Guardian)
- Japan agrees 2% inflation target and asset purchases (BBC)
- Currency Wars & ECB’s Shrinking Balance Sheet (AshrafLaidi.com)