Cable Set For Quick Recovery After One of the Worst Falls In Months
Jul, 27th 03:16
While the past week may have left pound bulls bruised, they’re far from defeated.
Sterling fell the most since May against the euro as a report showed U.K. retail sales unexpectedly shrank in June, puncturing investors’ optimism about the strength of the economy and the scope for higher interest rates. Still, with data next week likely to show economic growth quickened in the second quarter, the case for higher borrowing costs may be boosted once again.
“The risk is that, over the course of the summer, actually sterling will start to come back, and come back quite strongly,” said Simon Derrick, chief markets strategist at Bank of New York Mellon Corp. in London. “We’re in a pretty benign investment environment. The only thing that, therefore, is on investors mind is: Where can I pick up any kind of yield?”
The pound depreciated 1.8 percent in the past week to 70.75 pence per euro as of 5 p.m. in London on Friday. It strengthened 3.6 percent the previous week. Sterling dropped 0.5 percent to $1.5516.
A report on July 28 will show the U.K. economy grew 0.7 percent in the second quarter, compared with 0.4 percent in the previous three months, according to the median estimate of analysts in a Bloomberg survey. The pound may strengthen toward 65 pence per euro in the next six months, Derrick said.