UK GROWTH: Weak sterling a mixed blessing for UK equities

Since the start of the year, sterling has weakened materially against the US dollar, and slightly against the euro. For owners of UK equities this is a mixed blessing.

Currency weakness has boosted the returns of overseas asset classes relative to the UK and encouraged a net withdrawal of investment out of the UK, according to most recent funds data. However, the UK market has substantial overseas earnings and these are now translated back at a higher level, boosting sterling profits. On the flip slide, importers face margin pressure as transactional pain kicks in. As such we have seen a skew in investment performance within the UK as investors exit UK domestic earnings looking for overseas exposure. These decisions are being made from the perspecti...