Sterling strengthens after equities rally

Sterling strengthened against the dollar yesterday by 0.15 cents (0.09%) finishing the day at $1.6225.

• Sterling weakened further against the dollar in early trading yesterday, following the news that Lloyds Plc is likely to announce further losses in its first half earnings report. The news was reported by the Sunday Times from an unknown source and could be as much as £13 billion.
  
• However losses were limited as stock markets rallied, in particular in the US following comments made by analyst Meredith Whitney who stated that investors should buy shares in Goldman Sachs and that banks are likely to improve their earnings by 15%.
  
• Jobless claims data due in the UK tomorrow will be of particular importance as it is expected to show an increase in claims in June from the May forecast. This may have an adverse effect on sterling.
  
• There are several significant announcements due in the UK today, including Consumer Price Index and Retail Price Index at 09.30 BST. If the results are weaker than expected then that may result in the Bank of England extending their quantitative easing plan and possibly further weakening the pound. In the US, Producer Price Index and Retail Sales data will be of most significance, when they are released at 13.30 BST.