October Monthly Outlook: GBP/EUR and GBP/USD

Sterling to benefit from resurgent UK economy

From the eurozone, September’s two key events were ECB President Draghi’s announcement of his long-awaited bond-buying plan and the German Constitutional Court’s decision to approve the permanent bailout fund. Since then, there has been a real lack of any further concrete developments, which has understandably frustrated many market players and caused some risk aversion. As the next major event in the timeline of the eurozone debt crisis, speculation over the imminence of a Spanish bailout request is dominating market thinking at present. PM Rajoy does not actually appear to be much closer to making a formal request; he looks likely to wait until after Spanish regional elections to be held on October 21.

From the US, we have finally seen Ben Bernanke deliver what the market has been waiting for – more support for the US economy in the form of QE3. The move was priced in to a large extent but the dollar has been unable to stage any significant recovery in the immediate aftermath of the Fed’s announcement.

Conditions here in the UK continue to look a little brighter, though understandably many investors will still need further positive evidence to be truly convinced that the economy is on a path to a sustained recovery. However, with the Japanese and US central banks engaging in QE in September and the European Central Bank also taking monetary easing measures of its own (though rather more unconventional), the market is beginning to look more favourably upon the pound again.

GBP/EUR

Spanish delays will hurt the euro

Sterling has made a decent recovery against the euro in recent weeks, after what was quite a sharp decline as a result of the optimism that followed the announcement of the ECB’s bond-buying plan. There has been a positive response to some of the UK figures that have emerged in recent weeks; trade balance data revealed a dramatic rise in exports to destinations outside the EU, suggesting UK businesses are adapting to deteriorating eurozone demand. Meanwhile, UK unemployment figures continue to defy the overall weak picture of UK economic growth by making significant strides. From retail sales data to public sector borrowing figures, the UK economy has been beating market expectations time and again and this is filtering into some sterling strength. Another positive has emerged with the latest upward revision to the UK’s Q2 GDP figure to -0.4%, considerably better than the original estimate of -0.7%. Hopes are high for a very strong showing for the Q3 UK GDP figure released on October 26.

The minutes from the MPC’S September meeting revealed a unanimous vote against further QE (for now). The decision in favour of leaving the BoE 0.5% base rate unchanged was also unanimous. The fact that one MPC policymaker saw a good case for QE in September did not go unnoticed but as things stand, the Bank of England is understandably in wait-and-see mode. In light of the increased room for domestic optimism and the easing of financial conditions in the eurozone in recent weeks, it will not come as much of a surprise to learn that we are not expecting any fresh monetary easing measures from the Bank of England this month. November is likely to see the Bank assess its options much more carefully though.

Coinciding with strong economic figures has been an increased appetite for the pound as a relative safe-haven. Gilt yields have declined in recent sessions as investors attempt to take cover from renewed uncertainties from the eurozone and as usual this has boosted the pound by association. With the QE decisions from the US Federal Reserve and the Bank of Japan in September, sterling has climbed a little higher up many investors’ wish lists in recent weeks.

Putting improved UK conditions to one side, the major factor behind GBP/EUR’s climb in the past month has been a shift in sentiment against the euro, as is predominantly the case when this pair climbs. The market relief that followed the ECB’s commitment to buy unlimited quantities of distressed peripheral debt has well and truly worn off. Investors have refocused on the major issues facing Spain and Greece in particular.

PM Rajoy has thus far snubbed the opportunity to take advantage of the ECB’s offer to purchase Spanish debt, fully aware of the austerity demands that will accompany such intervention. Rajoy is under enormous pressure domestically, with the rich Catalonia region demanding independence and fierce protests taking place in Madrid over existing austerity measures. The market is likely to have to wait until after regional elections held on October 21 for Rajoy to bite the bullet, which leaves a good three weeks of frustration ahead. That said, if rating agency Moody’s cuts Spain’s credit rating to ‘junk’ status, then a spike in Spanish bond yields could force Rajoy’s hand a little sooner.

Greek saga remains volatile

The situation in Greece also remains typically uncertain. October is an important month too, with some chunky bond repayments maturing. Disagreements not only exist between Greece and the Troika (EU, ECB and IMF) but between the IMF and the EU. With the Greek debt profile blown even further off track by a deeper than expected recession, the IMF is now pushing for another Greek debt restructuring in order to get its debt sustainability back on track. Unsurprisingly, more ‘haircuts’ is not at the top of the EU’s list of priorities.

It looks as if there is some consensus over giving Greece an additional two years to meet its targets and the government appears to have been reached an agreement for €13.5bn in additional spending cuts that they hope will unlock the vital next tranche of aid. However, the agreement still needs Troika approval and would need to be approved by the Greek parliament, which amid violent public protests in Athens is no dead cert. Speculation has surrounded the need for a third Greek bailout but this option looks to be a non-starter as it would require parliamentary approval from individual member states. The bottom line is that Greece may well leave the eurozone but EU leaders are unlikely to let this happen while conditions in Spain remain so tense. The pressure for stronger signs of progress will be turned up once again at the next EU Summit on October 18-19.

Sterling has recouped its mid-September losses against the euro and is back trading above the €1.25 level. With market confidence so shaky at present, any concrete progress - most importantly from Spain in the form of a bailout request – will likely give the euro a significant lift. However, our baseline scenario is that this will not occur and that sentiment will continue to weaken towards the euro, helping sterling to build on its domestic economic resurgence and resume its uptrend against the euro.

GBP/USD

Dollar to strengthen despite QE3

The US Federal Reserve finally pulled the trigger on QE3 in September, which meant it was another very soft month for the US dollar. There have been some bright spots amongst US figures in the past month, with trade balance, retail sales and consumer confidence figures all showing some improvements. However, there has been plenty of evidence of continued economic weakness to support Ben Bernanke’s decision to turn the printing presses back on; last month’s key employment update gave little to cheer about. In addition, the final US GDP figure for Q2 was sharply and unexpectedly revised down to 1.3% from 1.7%.

The issues of weak US economic growth and a long period of quantitative easing are by no means at the top of most investors’ list of concerns. The US dollar has strengthened a little in the past fortnight, amid waning euphoria surrounding the QE3 announcement and the ECB’s pledge to purchase peripheral debt. Spain has not asked for a bailout, Greece has not secured its next tranche of aid and growth across the world is slowing. These are all dollar-friendly factors and the slowdowns being seen in China and the eurozone (including Germany) are of particular concern.

Whilst UK growth data has been remarkably positive in recent weeks, the ongoing fragility of the UK recovery has already been highlighted this week by a weaker than expected manufacturing figure. If sterling is to avoid another short-term sell-off against the US dollar, the UK services figure released on October 3 must be firm. However, sterling should get plenty of support in the form of the preliminary Q3 UK GDP figure released on October 26; we are looking for a robust quarterly showing of around +0.6%.

As things stand, sterling is trading almost two cents below September’s 13-month high of $1.63 and we think this high will remain a ceiling for this pair. Regardless of QE3, we see plenty of scope for increased demand for the safe-haven US dollar. We are still anticipating weakness in the EUR/USD pair, which should send GBP/USD back below $1.60 in October. 

Richard Driver

Currency Analyst

Caxton FX

UK Q2 GDP contracts by less than expected: things are looking up

The final UK GDP figure has been announced this morning and the news was very good; the UK economy only contracted by 0.4%, less than than the previous -0.5% estimate and considerably less than the original -0.7% reading. So in simple terms, the UK economy was only around half as bad as first thought in Q2. An upward revision to the construction sector’s performance is a key cause of the upward revision.

The Bank of England reckons that the extra bank holiday for the Queen’s Jubilee in June cost the UK economy as much as 0.5%, so underlying growth could actually have been positive in Q2. There is a big difference between stalling growth and deepening recession. Today’s upward revision really dovetails with what Mervyn King has been saying for the last few months. The figures released by the Office of National Statistics (the GDP figures) have underestimated UK growth, or at least overestimated the impact of the Jubilee bank holiday.

UK figures have been showing some significant improvements this summer, helped by the Olympics, and MPC member Fisher has commented today that we can expect a “very strong” GDP reading for Q3. In fact, we are expecting Q3 growth to more than make up for Q2’s contraction, perhaps showing a reading as high as 0.7%.

Of course, downside risks should be noted and the UK is a long way from being out of the woods and free from recession fears. The eurozone debt crisis continues to pose a threat to our banking system and it is certain that eurozone growth will be more or less non-existent next year. Nonetheless, this morning’s figure is good news and October 26 will bring more in the form of a robust preliminary Q3 GDP reading. All good news for the pound, which has already enjoyed a rally today, trading above €1.26 and $1.62. 

Richard Driver

Currency Analyst

Caxton FX

Will the ECB cut interest rates next week?

Away from what’s going on in Spain and Greece, let’s take a look ahead at next week’s ECB meeting. This week’s key German business climate figure was awful and the significance of this will certainly not have been lost on the ECB. With economic contraction throughout the periphery weighing on growth in the eurozone’s powerhouse economy – will the ECB finally put its deeply engrained fear of high inflation to one side and give Germany and perhaps more importantly the rest of the eurozone a helping hand by lowering interest rates?

A German contraction in Q3 is not a certainty but it is now looking likely, particularly in light of the latest German confidence figure, which hit its lowest reading since March 2010. Spain’s central bank warned yesterday that its economy’s GDP continued falling at a “significant rate” in Q3, while S&P forecasted that Spanish GDP will contract by another 1.4% in 2013 and the eurozone economy a whole will achieve zero growth. With conditions so dire in Germany’s major eurozone trading partners, you don’t have to dig too deep to find motivation for a rate cut.

Domestic consumption, which accounts for around 60% of German GDP, is in good shape and consumer confidence remains stable. Admittedly, other domestic German indicators such as the ZEW and PMI surveys also suggested things are not so bad but we can probably put this down to temporary positivity triggered by the ECB’s bond-buying plan. The German business climate survey has built up a strong correlation with German GDP, which leads us to believe a Q3 contraction is on the way. Weak exports are likely to outweigh robust domestic demand.

Still, the ECB seems unlikely to cut interest rates next week. The ECB appears to have already factored in further weakness in eurozone growth; recently projecting a 2012 GDP contraction of between -0.6% and -0.2%. This latest poor figure from Germany probably does little to change the ECB’s approach. Indeed Draghi acknowledged a weaker business cycle in his September ECB Press Conference.

In addition, the ECB’s Nowotny has recently stated that he “sees no need to change interest rates in the eurozone currently.” ECB policymakers have also been lauding the positive response in the financial markets to the ECB’s bond-buying plan, suggesting they are satisfied with the 0.75% interest rate at present. Draghi will also be eager to keep the German ECB policymaker Weidmann on side by waiting until a rate cut is absolutely necessary, when German growth has completely ground to a halt and inflation has eased further. This is likely to happen later on in Q4, perhaps in December. The euro is certainly feeling the pressure at present but it will likely be spared the downside factor a rate cut for the time being.

Richard Driver

Currency Analyst

Caxton FX

Caxton FX Weekly Round-Up: Spanish bailout issue to weigh on euro

Market frustrations with Spain on the rise

Spanish PM Rajoy’s failure thus far to accept the inevitable and make a formal request for a bailout has weighed on the euro in recent sessions. The week ahead brings plenty of interest; we are due to see Spain’s draft budget for 2013, the results of the Spanish banking sector’s recent stress tests and an economic reform programme that is likely to be a prelude to a bailout package. Even if these developments are welcomed by the market, we still think that Rajoy will wait until after Spain’s regional elections on October 21, which leaves several more weeks of uncertainty and frustration. This should delay any further euro rallies.

On the Greek front, we have seen some alarming headlines that the budget deficit is nearly twice as large as initially estimated. Talks between Greece and the Troika are now on a one week hiatus, so the market is left with alarming rumours of the need for a third Greek bailout and another Greek debt restructuring. The option of granting Greece more time to meet its bailout targets is gaining support but at this stage we are very much in speculation territory.

Concerns over eurozone growth have returned to the fore this week, after another awful German business climate survey. The risks of a German recession are rising, a development which the periphery can ill-afford.

Sterling firm ahead of final GDP number

The pound is performing well across the board at present. Eurozone concerns have returned after an August lull, while the central banks of Japan and the US have both eased monetary policy further, leaving sterling to reap the rewards. In addition, UK data has improved in recent weeks and the BoE seems to be content for the time being to delay any further QE of its own.

Sterling should be able to hang on to its recent gains against the euro and perhaps even build upon them, provided that Thursday’s final UK GDP number for Q2 does not suffer a downward revision to the already worrying   -0.5% reading. This release, which is likely to remain unrevised, is the only major event on the domestic calendar this week. By and large, the market’s gaze will be firmly fixed upon Spain.

US dollar soft after QE3 decision but continues to look poised for a bounce

Sterling remains at heady heights close to a 13-month high against the US dollar, thanks in no small part to the Fed’s decision to do a third round of QE earlier this month. However, the dollar’s behaviour since the decision suggests the move was more than a little bit priced in. Certainly the pound has climbed against the greenback but it has really stalled at the $1.63 level, so much so that we expect the rate to fall back in the coming weeks (provided that Rajoy doesn’t surprise us with an early bailout request)

End of week forecast

GBP / EUR	1.2625
GBP / USD	1.6150
EUR / USD	1.2800
GBP / AUD	1.5600

Risk appetite is pretty weak at present and the flow of news out of the eurozone is predominantly very negative. There remain disagreements over the EU banking union, over the legality of the ECB’s bond-buying programme, over the cession of Catalonia from Spain and much more besides. With this in mind, the GBP/USD rate’s ceiling of $1.63 looks likely to hold firm in the coming sessions. Meanwhile against the euro, sterling looks better placed to climb further. A move back up above €1.26 is a likely one this week.

Richard Driver

Currency Analyst

Caxton FX

German confidence tumbles again, pointing to possible German recession

A monthly German survey, which covers around seven thousand firms, has been released this morning to reveal that German business confidence has declined for the fifth consecutive month. A flat reading was expected but German business confidence has now dipped to its weakest level seen since March 2010. The news provides further evidence of the dampening effects of the eurozone debt crisis on the region’s powerhouse economy and has accordingly weighed on the single currency today.

Firms in manufacturing, construction, trade and industry were mostly responsible for the poor climate reading, though retail and wholesale trade did improve slightly. The regional downturn is having a particularly noticeable impact on Germany’s exports to other eurozone nations. The economic weakness being seen in major nations like Spain, Italy and even France cannot be viewed in isolation; recessions are particularly contagious in a currency union like the eurozone and this morning’s data indicates that Germany is succumbing.

Interestingly though, an economist from the producers of the data - the Institute for Economic Research - has stated that German consumption remains robust despite a weaker labour market and therefore does not see a need for an interest rate cut from the European Central Bank. An interest rate cut would however weaken the euro, which could boost exports outside the eurozone, though this would require Germany’s preoccupation with high inflation to be set aside. The IFO economist did also note that the survey was taken prior to the positive decision from the German Constitutional Court earlier this month, the uncertainty surrounding which may be at least partly responsible for the unexpected decline.

The economic downturn is not just bad news for Germany but for the eurozone’s peripheral nations as well. If Germany enters recession, then it is going to be increasingly difficult for Merkel to justify and deliver the support she is pledging for struggling nations like Spain and Italy. With plenty more austerity measures still to come across the eurozone, the prospects for the economy as a whole and Germany by association, are rather gloomy. After Q2’s 0.3% GDP growth, Germany may avoid economic contraction in Q3 but the same is unlikely to be true in Q4, such is the downtrend that is in place. This is not to say that Germany is certain to enter a recession but the risks are very significant and it is looking increasingly likely, which is bad news for all concerned.

We may have seen some progress on the debt crisis in the last month or so but economically, the region is in very poor shape indeed, which is in part why we maintain a negative outlook for the euro.

Richard Driver

Currency Analyst

Caxton FX

Spanish bailout will come but not for another month

The newswires have today been full of speculation over the imminence of a Spanish bailout. The FT has reported this week that negotiations between Spain and the EU are going places. The two parties are working on an economic reform programme which is rumoured to be unveiled next week. Note though, this is only a prelude to a bailout request.  

What is Spanish PM Rajoy waiting for? Well, regional elections in the Basque country and Galicia are being held on October 21 and Rajoy is likely to wait until after that, as a bailout request before this date would more likely than not damage his Conservative party’s chances. This end of October period coincides with some major Spanish debt repayments and is probably as long as the market is willing to wait for some concrete progress.

There is something to be said for getting in early with a bailout request whilst bond yields are away from their record highs, so that Rajoy is in a better position to negotiate favourable bailout conditions. If Rajoy waits until the situation returns to panic mode, Spain’s creditors could have him over barrel.

Next Friday’s release of the Spanish banking sector’s stress tests could well spook the markets and send bond yields soaring up to 7.0% again but on balance we expect Rajoy to wait until late October, just in time for the ECB’s meeting in the first week of November. This leaves time for bailout conditionality to be ironed out between the interested parties.

We believe Rajoy will use the next month to try everything he can to achieve the best result for his country. He is under huge domestic political pressure by an increasingly angry and volatile population and cannot afford to be seen to sacrifice more than is absolutely necessary in return for a bailout. Everything should be in place by the end of October and until then, the euro is likely to come under increasing selling pressure.

Richard Driver

Currency Analyst

Caxton FX

Bank of Japan follows suit and eases monetary policy but the yen remains strong

 Last night’s monetary policy decision from the Bank of Japan saw further support provided to the Japanese economy. The BoJ added to its existing asset purchase programme by Y10trn, taking the total purchases to Y80trn. This Y10trn increase has come earlier than many expected and was certainly more than most market players expected. BoJ also extended the deadline for the end of the programme by six months to the end of 2013.

Nerves over the global economy are a major factor behind the BoJ’s decision. The US recovery remains shaky, the risks of a Chinese hard landing are rising, while there is little doubt that the eurozone has not seen the worst of the current economic contraction.

Global conditions have contributed to what the BoJ has described as a “pause” in the domestic Japanese economy. BoJ Governor Shirokawa has said the Japanese recovery has been set back by six months thanks to a prolonged global economic slowdown. Exacerbating the domestic growth outlook is the fact that a territorial dispute between China and Japan threatens to disrupt trade relations, something Japan can ill-afford.

Also in the BoJ’s mind will be the desire to curb the appreciation of the yen, which is hurting the Japanese economy. Particularly in light of the US Federal Reserve at last announcing QE3 this month, another move from the BoJ was always likely. However, the yen hasn’t weakened off today as much as the Japanese official would have liked. It has retraced almost all of last night’s losses, which demonstrates that there is no guarantee that QE will weaken a currency. 

Richard Driver

Currency Analyst

Caxton FX

RBA signals interest rate cuts in October

The Reserve Bank of Australia released the minutes from its September meeting last night and the Australian dollar has since weakened. This is because the minutes were probably the most dovish we have seen from the RBA in six months, suggesting a cut to its 3.50% interest rate could be just around the corner. To say the RBA has signaled a move may be an overstatement but the we are hearing the hints loud and clear.

The minutes included the assertion that "the current assessment of the inflation outlook continued to provide scope to adjust policy in response to any significant deterioration in the outlook for growth." This is a telling statement.

Australian data has not overall been particularly positive of late but it is hardly reason for the RBA to panic. Indeed, the RBA appears to be confident that domestic growth is on the right path. Investment looks to be positive for the rest of the year, consumer confidence is up and the unemployment picture is relatively stable, as shown by the recent fall to 5.1%.

Rather, evidence of renewed weakness in the Chinese economy is a major driver. Linked to this is the second issue on the RBA’s mind, which is declining commodity prices, in particular iron ore and coal prices. It’s not just China that the RBA is concerned with either; data from the eurozone and the US is also pointing to a further global slowdown.

So the bank has changed from a neutral tone to an easing bias. The comments reflect those within the RBA’s March meeting, which was followed by a 0.50% interest rate cut in April. We don’t expect a 0.50% cut in October, but we do expect a 0.25% cut, and then another in November or December. The Fed and the ECB’s recent monetary policy decisions will surely aid global growth eventually but this will take time to feed through and results won’t come soon enough for the RBA.

Richard Driver

Currency Analyst

Caxton FX

Rejection of further austerity leaves Spanish bailout in limbo

Spanish PM Rajoy has made no secret of his aversion to EU-dictated austerity measures in return for a bailout. The financial markets and Germany in particular are demanding further Spanish cuts but Rajoy’s response last week was; “"I will look at the conditions but I would not like, and I could not accept, being told which were the concrete policies where we had to cut." His country's economy is already in shreds after a July austerity-drive. 

Thousands of angry Spaniards marched in protest in Madrid over the weekend, demanding a referendum to decide on the government’s measures. Tensions and unrest in the country are at such levels now that Spanish finance minister Luis de Guindos has responded by ruling out further spending cuts. He said “Spain's existing measures are significant and ambitious enough” to meet the EU’s target of a budget deficit that 3.0% of GDP by 2014. It is common knowledge that Mr de Guindos is quite incorrect in saying this, and he well knows it, but it is in his country’s interest to keep up the charade.  

But where does this leave Spain with respect to the European Central Bank? Whilst the market went wild for the ECB bond-buying plan just over a week ago, the fact remains that Spain must officially request a bailout if it is to benefit from the plan. It will not do so if Germany’s demands are too onerous.

The announcement of the ECB’s bond-buying plan has bought Spain a little bit of time by bringing borrowing costs down, coming way down from the 7.0% level (10-year debt). Nonetheless, yields are back on the rise and the clock is very much ticking. Deposits are being withdrawn from Spanish banks at an alarming rate amid the current crisis of confidence, which will necessarily constrict the banks’ ability to support much-needed economic growth with lending.  

In an indication that Spain is edging towards a bailout request, it has pledged to unveil a reform programme on September 28, which will include clear deadlines and intended structural changes. We are still in the dark over bailout terms though and this is likely to be a huge source of uncertainty in the coming weeks. 

And how has the euro started the week? Well its rally has stalled, as it consolidates on last week's hefty gains. However, the market euphoria with respect to the ECB pledge to flash the cash and the Fed's decision to pull the trigger on QE3 may well give the euro further support in the coming sessions. 

Richard Driver

Currency Analyst

Caxton FX

Swedish Krona set for further losses

The Swedish krona continues to trade at impressive levels across the exchange rates. The krona has been boosted by an ongoing recovery in market confidence, driven in particular by some key breakthroughs in the eurozone. This confidence has fed into sustained appetite for higher-yielding currencies like the SEK.

The key development from Europe this summer has been the ECB’s pledge to provide unlimited bond-purchases for peripheral eurozone countries like Spain and Italy, whose soaring borrowing costs have been a major feature this year. The ECB’s pledge has already had a very positive impact on eurozone bond yields and has eased some of the more immediate concerns that the debt crisis may spiral out of control before EU leaders can react. The improved global sentiment has been given another boost by the German Constitutional Court’s approval of the European Stability Mechanism, which is to be the eurozone’s permanent bailout fund. While the issue of firepower is by no means solved, the eurozone’s ability to respond to Spain and Italy’s refinancing needs has certainly improved.

Sentiment towards the Swedish economy remains broadly positive, which isn’t surprising given the outstanding Q2 GDP figure released in late July, which smashed forecasts. 1.4% quarterly growth is probably more than most G10 economies can hope to achieve throughout 2012 as a whole. Domestic consumption remains in good shape and the Swedish export sector’s continues to stand up pretty well in the face of deteriorating growth and demand in the eurozone. However, there has been some recent economic weakness that may persuade many investors to give up on hopes for any further SEK rallies.

GBP/SEK Outlook

The situation in the UK has been fairly grim this summer, with data confirming that on top of Q1’s 0.3% contraction, the UK economy contracted by another 0.5% in the second quarter, with the extra Bank Holiday as a result of the Queen’s Diamond Jubilee weighing particularly heavily.

However, the UK economy is showing some solid signs of turning a corner in Q3. Industrial and manufacturing production data has shown some excellent growth, the UK services sector bounced back in July, while the latest trade balance and labour statistics have also been very positive. Thanks in no small part to the London Olympics, there is now a decent chance of a positive Q3 GDP figure, which should result in some support for the pound.

Also supportive of the pound is the near-term outlook for Bank of England monetary policy. The BoE appears content to sit it out and wait for the effects of both its Funding for Lending programme and its last QE top-up, before easing monetary policy any further. Conditions in the eurozone have eased up, while domestic activity has improved in the past couple of months, which should ensure there is no more QE until November at the very earliest.

There is no doubt that the Swedish spent Q2 in rude health but there have been some mildly concerning figures released of late. August saw a surprise rise in unemployment to 7.2% from 7.0% and a very weak manufacturing growth figure, while the latest industrial orders data suggests there could be some further weakness down the line. However, it was weak Swedish inflation, not tame growth figures, which prompted the Riskbank to cut its base rate by 0.25% to 1.25% in September.  While Swedish krona’s interest rate differential has now been eroded, the market’s response was quite muted.

This pair posted fresh multi-month lows in the past fortnight, amid a series of positive eurozone developments. However, support levels have kicked in at 10.5, which has coincided with stronger UK figures and a slight loss in momentum in Sweden. These factors should combine to send GBP/SEK pair higher off these current lows in the coming month. 10.7-10.8 is a decent target area.

Richard Driver

Currency Analyst

Caxton FX