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Our view of a dollar negative day yesterday proved correct as UK sales and output allowed GBP to climb to a 4 month high against the greenback. Sterling also made some slight inroads against euro.

Manufacturing in the UK dropped by 0.1% against a consensus decline of 0.8% and although this leave manufacturing output in the UK at over a 60 year low shows that the recession is softening. Retail sales in the UK were also at their highest level since 2006 leading market participants to get bullish on sterling.

Risk appetite was also helped by the news that business investment in China rose 30.5% in Q1 with Chinese retail sales also higher than expected although IP was slightly lower.

There is an article in today’s FT suggesting that US sovereign debt may be downgraded in the near future; pish. It’ll never happen due to the awesome shockwaves it would send through so many different and varied markets and even it did happen the US would still stay very near the ‘top of the charts’ relative to other economies.

While data for the UK over the past couple of weeks has been largely positive for sterling today’s Bank of England Inflation Report poses a risk to the gains made over the past day or so. As we said in Monday’s update we expect a better than consensus growth expectation alongside higher CPI figures but are wary of any ‘foot in mouth’ syndrome that the press conference may bring. In other words, we believe that GBP will weaken from 10.30 onwards today.

The unemployment figures due today were accidentally published yesterday painting a pretty dire picture of the UK jobs market. The thing to remember about the jobs market is that it lags behind the economy by around 6 months. November 2008 was one of the darkest economic months we saw in this crisis and hence the unemployment rate has risen to 7.1%.

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Please feel free to contact me jeremy.cook@worldfirst.com(jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange on 020 7801 9050 or ourPrivate Client Currency Exchange on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms..

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