Sterling set to strengthen

A string of stronger than expected data.

The sterling seems set to strengthen. At least against the Euro. That is the message that macro-economic fundamentals are giving us right now: robust Retail Sales figures, higher than expected core inflation, and rapidly reviving housing markets, the latest in a string of stronger than expected data.

There now seems little prospect that the new Bank of England Governor, Mark Carney, will preside over any more quantitative easing or cuts in base rates after he takes the helm in July. Indeed the sterling interest rate futures markets have already started to anticipate rises in rates, with the first 0.5 per cent hike now expected as early as the end of next year.

Short-term interest rates can be an important determinant of exchange rates; especially when the differential between the two rates involved changes rapidly, and one finds it hard to envisage a rise in Euro rates any time soon. Indeed, we are lead to believe that debate continues to rage within the European Central Bank as to whether they should take their deposit rate into negative territory.

I personally do not expect that to happen, principally because of the "locomotive effect" from an American recovery which is gathering pace by the day. The UK also stands to benefit from this effect, but much more so given the absence of the idiosyncratic challenges which face the Eurozone, in the shape of extreme imbalances between regions, ongoing steroidal austerity and the ever present threat of violent social unrest this summer as tragic levels of unemployment drive voters onto the streets.

The UK’s flexible labour market also places us in a much better position to expand. The foreign exchange markets have a knack of moving very rapidly to discount these sorts of changes in prospect for both the economy and interest rates.

If this move in sterling went too far, however, the new Governor may start protesting. He may well see the tightening in monetary conditions that this would imply, as too much, too early for a still nascent recover. However, the foreign exchange markets can move a long way, and very quickly, before he settles into his seat next month.

Bank of England Governor, Mark Carney. Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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New Digital Editor: Serena Kutchinsky

The New Statesman appoints Serena Kutchinsky as Digital Editor.

Serena Kutchinsky is to join the New Statesman as digital editor in September. She will lead the expansion of the New Statesman across a variety of digital platforms.

Serena has over a decade of experience working in digital media and is currently the digital editor of Newsweek Europe. Since she joined the title, traffic to the website has increased by almost 250 per cent. Previously, Serena was the digital editor of Prospect magazine and also the assistant digital editor of the Sunday Times - part of the team which launched the Sunday Times website and tablet editions.

Jason Cowley, New Statesman editor, said: “Serena joins us at a great time for the New Statesman, and, building on the excellent work of recent years, she has just the skills and experience we need to help lead the next stage of our expansion as a print-digital hybrid.”

Serena Kutchinsky said: “I am delighted to be joining the New Statesman team and to have the opportunity to drive forward its digital strategy. The website is already established as the home of free-thinking journalism online in the UK and I look forward to leading our expansion and growing the global readership of this historic title.

In June, the New Statesman website recorded record traffic figures when more than four million unique users read more than 27 million pages. The circulation of the weekly magazine is growing steadily and now stands at 33,400, the highest it has been since the early 1980s.