The recent spate of sterling positive data continued yesterday with the pound hitting a 6 month high against euro while also making positive ground against other trading partners including USD.

We would be cautious to say that we have broken the back of the past 6 months of euro strength as anything from further political disturbances to a run of poor data could nix this rally very quickly. The prospects of a stronger GBP over H2 do seem to become increasingly likely and anybody reading this who is a buyer of GBP from other currencies should think about hedging their exposures soon.

Alisdair Darling is featured in the top story in the FT this morning asking people not to get carried away with the signs of the economic recovery, this comes after the news that the National Institute of Economic and Social Research voiced that the downturn is done with Martin Weale, the institute’s director, saying he believed that the recession was now over “as far as I can tell”. With some economists revising down their unemployment figures to below 3m some credence may be given to the notion that Bumbling Brown, Dithering Darling and Myopic Mervyn King have pulled a recovery sized rabbit out of a recessionary hat. It is my view however that another dip is almost inevitable and that counting chickens is a dangerous pastime.

The other side of the equation is the fact that data from the EU has been pretty poor. Confidence is still low, house prices are depressed and unlike the UK we have not seen an expansion in any of the main indutstry (Service, Manufacturing, Construction) PMIs. Industrial production should be weak in the eurozone today after poor national figures from the Netherlands and France and news that German exports slumped to a record low. Risk appetite could also benefit today should we see a strong Michigan Consumer Sentiment figure this afternoon.

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