By Jonathan Watson

Sterling has enjoyed a very favourable couple of months against a host of currencies. Positive GDP data had helped bolster the currency and continued strong retail sales and data releases seemed to reflect that the UK economy was not only moving in the right direction, but that the budget cuts were correct.

The problem is we will not see the real effects of the budget cuts for a few months and only time will tell how successful they have really been. Net mortgage lending showed a major fall yesterday and considering that housing is a major driver of the economy, should this be faltering or not recovering as strongly as required, sterling could be in for a torrid time.

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