At last some sense of direction, even if it is the wrong way for most of us.  Regular readers will know that I am looking for a fall in the sterling/euro exchange rate before we can look forward to another go at getting past the 1.2500 level.  We could well be looking at that fall now, with sterling having ended the week twenty points below the psychologically important 1.2000 level.  The week started quietly, but then on Thursday the merde started flying...

First UK housing data…

Sterling fell against the euro and the dollar as weak housing and construction data added to concerns that a fragile UK economic recovery could be running out of steam.  The pound hit a three-week low versus the euro after data showed growth in the UK construction sector slowed in August, adding to fears that the economic improvement seen in the first half of the year may not be sustainable.  If the UK slips back into recession, the pound will fall and this could be the start of a serious correction.

Then an EU growth forecast revision...

The European Central Bank raised its forecast for Eurozone growth for this year and next year.  Bank president Jean-Claude Trichet said the upgrade reflected the stronger-than-expected rebound in the Eurozone's economy.  Mr Trichet said the recovery has been supported by global growth and reflected 'temporary domestic factors', whatever he means by that.  He did at least qualify his remarks by saying that uncertainty still prevails, which it certainly does.  It was another twist of the knife for sterling though, and we saw the rate dip below 1.2100 as a result.

And the UK PMI...

What the hell is PMI? I hear you say.  Well, it's not what, it's who.  They are purchasing managers.  A faceless lot who produce a monthly survey saying how much of other people's money they are spending in the services sector.  Sterling lost more ground against the euro on Friday after much weaker-than-forecast UK services sector data raised concerns that economic growth could falter later in the year.  The survey showed that UK service sector activity grew at its slowest pace since April 2009, with a marked fall in hiring as employers worried about an economic slowdown and public spending cuts.

By the end of Friday's trading sterling had bid farewell to the 1.2000 level, and next week could easily see more of the same.  It's hard to see at the moment where any good news is going to come for sterling, and I would not be surprised to see it below 1.1800 by the end of next week.

A bientot,   Rob

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.

Get more details about France Financial and Rob Hesketh

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