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So here we are at last, on the greatest day in modern UK sporting history.  GB to get a 1,2 in the British Grand Prix, England to lift the World Cup, and to top it all, the pound surges back to 1.5000.  Oh well, we can all dream.  We might do well in the GP, but both sterling and England fell at the second hurdle.

Interest Rates

As expected, there were no interest rate changes in either the UK or Europe this week. There was no comment after the BoE decision, so we'll have to wait for the minutes of the decision to see how many of the committee voted for a hike. If these show that there are any more dissenters in the ranks, it could cause a short term boost in the pound.  There was however some supportive comment for the Euro from the ERB after the  non-hike decision which pushed sterling down into the 1.19s.

Data
There was a lot of focus on inflation data from the UK this week.  Better news on the inflation front, with figures showing factory gate prices fell in June for the first time since the aftermath of the financial crisis.  The 0.3% drop - the first monthly decline since November 2008 - should help to ease inflation worries.  Inflation is currently well above the Bank of England's 2% target at 3.4%. 

The sharpest monthly fall in petrol costs for 18 months accounted for the bulk of the slide in output prices.  Which reminds me, as a quick aside, why is Gazole 6 cents cheaper in Narbonne than it is in Toulouse?

The first estimate of UK 2nd quarter  GDP was also released this week.  They show (guess)  that the economy grew by 0.7% in the 3 months to June against a figure of 0.6% in the three months to May. This gives us some idea of where the UK economy is going, and it's nowhere fast.

Don't look now...

Now I know I said when I started writing this column that I wouldn't use jargon.  Here's why, take a look at this:

In the bigger picture, whole decline from 0.9799 is viewed as a three wave correction from to the larger up trend. The break of 0.8381 resistance last week serves as the first signal that the third wave has finished at 0.8067 already, so has the whole correction. Focus will now turn to 0.8601 support turned resistance. Decisive break there will further affirm the case that long term up trend is EUR/GBP is resuming and will target 0.9410 resistance for confirmation. On the downside, in case of another fall, we'd continue to focus on reversal signal inside 0.7693/8186 support zone

In the long term picture, correction from 0.9799 is expected to be contained by 0.7963/0.8186 support zone and bring up trend resumption. Rise from 0.5680 is still expected to extend beyond 0.9799 high eventually.

This is scary stuff.  Whoever wrote this is obviously a very highly paid chartist.  What he is saying is that the current resurgence of sterling is temporary, and we are heading back, eventually, to near parity.

Well I'm an unpaid observer of these markets, and I think that is balderdash for want of a better word.

From here?

I suppose I could be called a moderate, but I think that sterling will retrace back down to the 1.15 or 1.16 level, and hen have another go at 1.25.  Fingers crossed!

A bientot,   Rob

Please note that all these comments are my personal view and do not represent any firm advice by either France Financial or the Spectrum IFA Group.

Rob Hesketh and France Financial

Rob moved to France in 2003 after working for 30 years in International Banking in the City of London and Brussels.  He joined the Spectrum IFA Group in 2005 and became registered and authorised by the French fiscal authorities in mid 2006.  He is now a partner in Spectrum and looks after client relationships in the South West of France.

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