Sterling strengthens due to takeover talk

Even though there was a lack of fundamental UK economic data on Wednesday, sterling moved higher against both the euro and the US dollar, as investors looked to lock in their positions ahead of large proposed corporate acquisitions. Two British companies were the subject of takeover bid talk from overseas firms and, with the bidders needing to purchase potentially billions of sterling to finance these deals, the value of the British currency jumped higher. However, with the US Federal Reserve releasing their latest interest rate decision last night, a recovering dollar towards the end of the day erased many of sterling’s earlier gains. The Federal Reserve’s statement turned out to be more of the same; as they get further evidence of an improving US economy, they will look to increase US interest rates, most likely sometime this year.

We expect attention to be focused on the US today, with the earliest measure of economic growth throughout the previous quarter is set to be released this afternoon.