Currency watch: Hurry up Harry

It seems that the Royal Wedding gave the UK economy the boost it needed in April, but the key will be whether this strength can last or if we need Harry to get on with proposing to his intended – whoever that may be – sooner rather than later.

Unfortunately this improvement is likely to be seen as a bit of an outlier figure as the mood on the High Street is still rather bleak, as typified by the announcement of the closure of 110 Mothercare stores which was announced on Wednesday.

It seems like the cheer the wedding gave TV viewers on the day itself is unlikely to last.
 
We expect to see market participants use this spike as an opportunity to further bet against the UK recovery via bets against the pound and gilts and the near term jump for the pound is already fading.

It seems that the market was particularly put off by the growth downgrade in the Bank of England’s Quarterly Inflation Report, published last week, that suggested growth in the UK would dip to 1.9% from a previous expectation of 2.2%.

This fear is all over communications from the BOE now, especially since the departure of Andrew Sentence, the key voice for rate hikes has left and leaves GBP in a bit of quandary as we bear down on the summer doldrums.
 
Jeremy Cook, chief economist at World First foreign exchange, 20.05.2011