The decline in the pound’s strength that we warned of 2 weeks ago has begun as sterling endured another day of losses against its major trading partners. Moving through trend support against the dollar yesterday points to a cable rate of around 1.57 and possibly lower from there. It’ll come as no surprise as to what’s driving it.

Stock markets were once again lower yesterday as US corporate earnings numbers weighed on sentiment. It is becoming inlcreasingly obvious that a poor earnings season will have wider reprecussions than just on a corporation’s balance sheet. Sterling speculators also believe that there is significant event risk surrounding Thursday’s Bank of England meeting and announcement. We would suggest that should the MPC decide to increase the quantitative easing facility that sterling will probably get mullered as fears over our fiscal position as a country evolves. Raised public debt is obviously the way to get people talking about cutting the credit rating of the UK; a potentially apocalyptic occurrence.

News from the NIESR was also poor in that they think that the bottom of the recession was not in Q1 and that a 0.4% fall in GDP is likely in Q2 for the UK economy; all things are pointing to a weaker sterling in the short term. Unfortunately weak data from Europe is also something we are not able to rely on any more; German Factory Orders exploded higher posting an increase of 4.4% against a consensus view of 0.5%.

Following the NIESR warning over our GDP figures we get a look at how the EU performed over Q1 as their figures on growth are released at 10.00 BST while BRC shop prices are due at 10.30 and German Industrial Production is expected to rise; verification will come at 11.00. G8 news flow will also have an effect today although one of dollar’s major critics Hu Jintao, the Chinese Premier, has returned home to deal with the breakout of violence in Urumqi.

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