Sterling ends the week on an high despite negative UK data

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The Euro had a poor week last week as the market feared the European debt crisis would spread to core Eurozone countries, as Italy and Belgium were put on negative credit watch by ratings agencies on Monday.

Sterling was resilient during the week, not reacting Tuesday's record budget deficit as Government spending reached £54.1 billion in April and Moody’s put 14 UK finance companies on review for a ratings downgrade.Preliminary first-quarter GDP figures came in unchanged for the UK at 0.5% on Wednesday, while the corresponding US figure on Thursday was a disappointing 1.8%, down from an initial estimate of 2.2%.

Sterling ended the week up against the Euro by 2.5 cents, up against the US Dollar by nearly 4 cents and up 3 cents against the Canadian Dollar compared to the previous week.

With London and New York on holiday there wasn't an awful lot happening yesterday and there was not a lot of substance in Friday's economic news. German inflation and US personal income and spending data were spot on forecasters' targets. A larger than expected fall in US pending home sales of -11.6% was offset by a bigger than expected improvement in the Michigan consumer confidence index of 4.5.

The New Zealand Dollar did well following the April trade surplus came in nearly twice market expectations at $1.113 billion. The Canadian dollar suffered following first quarter GDP coming below forecast at 3.9%; fourth quarter GDP in 2010 was also revised down from 3.3% to 3.1%.

It has been a quiet start to the week due to Monday’s public holiday in the UK and US. From the US this week, the main events are the Challenger job cuts report and the non-farms payrolls, due Wednesday and Friday respectively. Last month’s non-farms came out above expectations, but the slow pace of US growth has inspired little confidence and analysts’ forecasts for May’s figures are generally low. There is also the Bank of Canada meeting on Tuesday and Australian GDP on Wednesday.

As for the UK PMI data for May takes centre stage, with manufacturing on Wednesday and construction on Thursday.