Sterling's rise over the last few weeks
The pound has been in demand due to recent strong UK data, including forecast-busting second quarter economic growth, while a manufacturing activity survey on Monday came in above expectations.
Evidence of a healthy banking sector has also buoyed the UK currency because of the financial sector's hefty contribution to the UK economy, with banking giant HSBC recording better than expected profits, along with Lloyds this morning announcing healthy profits. All this combined along with a survey at the weekend that said the UK is likely to recover faster than the US and EU means that Sterling exchange rates have gained over the last few weeks.
Well yesterday the surge was checked slightly after a UK construction purchasing managers' index fell to a four-month low of 54.1 in July, from 58.4 the previous month. This halted the continued rise of the pound, and we remain fairly range bound this morning. If we continue to see good figures from the UK, then we could see the pound go higher. If however we see poor data then I believe it would not take much to knock the pound back down again.
A raft of inflation data is released for the EU and UK today. High inflation means a good chance of higher interest rates, which would strengthen the relative currency. Retail Sales for the EU will also be watched closely. The changes are widely followed as an indicator of consumer spending. Unemployment data for the US rounds off the day.