Last week was a much more positive week for Sterling, as it made gains on the euro and the dollar following nearly a month of continual losses against the major currencies, mainly due to the fact that UK interest rates will stay low and public finances are predicted to deteriorate further. However, on Friday the pound hit a three week high against the dollar extending what had been a dramatic rise on Thursday, and hit a high of 1.6398.

 
As there was no significant data released in the UK to boost Sterling, it has been suggested that the strengthening of the pound could be due to talk of overseas interest in UK firm Sainsbury from Qatar’s sovereign wealth fund, which is said to have increased demand for the UK currency.
 
Another suggested cause for Sterling’s gain is the comments made by by BoE board member Paul Fisher in a Financial Times interview on Thursday that the central bank’s interest rate cuts and QE programme were working. Confidence in a countries government is a major factor in how their currency performs, so these comments have installed a slight sense of belief in the UK government and that has meant an increase in demand for Sterling.
 
This new found confidence in the pound meant that it continued to gain against the euro, which fell 0.4% to 91.45p. Earlier in the day, it hit a two-week low of 90.96p, falling from a 6 1/2-month high of 94.13p touched on Tuesday.
 
In terms of data releases, today is very quiet for the UK and the U.S, and as a result we may see little volatility and movement in the currency markets. However as a whole the week is packed with data releases from the UK, the U.S and the Euro Zone, so any lack of movement in the market today is unlikely to be a trend continued throughout the week.

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