Sterling set for diverging paths against the Euro and Dollar

Daily Currency Update

As we turn into the back end of the week, the pound has seemingly entered a calmer state with overnight gains against the buck and more stable weekly ranges against the EUR.

Despite treading water for much of the last 3 trading days, we can see that GBP/EUR is offering more insight into the performance of the pound alone and giving us a slightly better window into UK affairs and how the market is interpreting their impact on the UK economy in comparison to other major peers.

Given the slowing economy and growing fears on the sustainability of UK public finances, the current state of affair’s doesn’t make for good reading and this was compounded by the latest report from the Office for Budget Responsibility.

With fiscal uncertainty still ongoing and weighing heavy on sterling’s growth prospects, it seems likely that the Governments current solution would involve imposing further tax hikes to aid in the reduction of the current deficit. However it is widely accepted that this will likely deepen the current trend of reduced spending within the countries economy and further dampen economic activity.

For the time being at least, it would look as though the government is out of ideas since the u-turn on welfare cuts and the UK’s fiscal priorities are currently very muddled.