The currency markets continue to surprise as Sterling has failed to grab the proverbial bull by the horns and steamroller into the €1.20s.

By Luke Trevail of TorFX

Instead after a fairly muted start to February, with little in the way of any fundamental data driving the market so far, the pound has settled to a very tight trading range of €1.19-1.20 for the last week or so.

Eyes now have fallen on Bank of England Governor Mark Carney as this week the central bank publishes its economic outlook report. Rumours of interest rates staying lower for longer are now rife in the market, and the pound may well lose some of the ground that it’s taken over the last couple of months.

The report will be released at the same time as the quarterly inflation report on Wednesday, and despite Carney repeatedly saying that growth will have to pick up further before policy makers increase borrowing costs he is likely to remain dovish as the risk of downside to the pound remains a threat.

For any buyers of the Euro remember that we are still trading at near a one year high, and anyone lucky enough to be buying at €1.19 or above should be fairly satisfied. The road to recovery (much like most roads near me after the terrible storms so far this year in Southern England) will be full of pot-holes trying to disrupt the direction of Sterling. Although ultimately we will get to our destination, it may be a bumpy ride along the way.

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