Pound strengthens against the euro

The pound strengthened against the euro by 0.35 cents yesterday, finishing the day at 1.1350.

• In early trading yesterday the pound strengthened against the euro, following news that UK Financial Investments (UKFI), which manages the UK government’s stakes in RBS and Lloyds Banking Group, had sounded out investors who may be interested in buying some of its holdings in the part-nationalised lenders.
  Sterling’s gains were also aided by continued strength on London equity markets, with the FTSE up 0.5% in early trade.
  
• However, the pound’s early gains were capped after the release of Year-on-Year Consumer Price Index data mid-morning. April’s reading of 2.3% was worse than the 2.4% forecast and the 2.9% recorded in March, prompting some investors to question the UK’s chances of a timely economic recovery.
  
• Elsewhere, much better-than-expected German ZEW Economic Sentiment figures released in the eurozone also allowed the euro to claw back some of sterling’s early gains. It registered at 31.1 for May, far ahead of the 20.0 analysts had forecast and the 13.0 recorded last month.
  
• After a solid day’s trading, London equities lost steam late on, causing the pound to weaken off slightly. The FTSE 100 finished the day up 0.8%.
  
• So far today sterling has resumed its rise against the single currency, as the deep pessimism surrounding the UK’s economic recovery continues to ease.
  
• There are no important economic announcements due in the eurozone today, however in the UK the Bank of England are releasing the Minutes from their last policy meeting at 09.30 BST.