Sterling down due to EU summit results

Published: 27 October, 2011

Sterling fell against the US dollar yesterday following the euro downwards against the US currency as markets nervously awaited the results from yesterday's EU summit.

Currency rates & October 27

EURO/GBP - 1.1418

US$/GBP - 1.5996

CHF/GBP - 1.4015

CAN$/GBP - 1.5980
AUS$/GBP - 1.5176
ZAR/GBP - 12.5250
JPY/GBP - 121.42
HKD/GBP - 12.4462

NZD/GBP - 1.9792
SEK/GBP - 10.3242

AED/GBP - 5.882

US$/EURO - 1.4022

After a night of deadlocked talks the EU summit finally delivered what most had been expecting - a 50% write down for holders of Greek bonds and a boost to the European Financial Stability Fund bringing it up to €1 trillion. Sterling is trading in a similar range as previous days this morning, but down against the euro as investors cautiously bought back into the euro on the news.

In the euro zone, whilst there was an announcement that a decision had been reached on increasing the bailout fund and also recapitalising banks in the region to the tune of €106bn, there was no concrete plan for tackling the ballooning debt in less competitive European countries. After producing a (vague) austerity plan, Italian parliamentarians ended up brawling and grabbing each other's throats - a photo that you will no doubt have seen by the end of today. Once again, the rhetoric was strong like most other EU summits, however there was a lack of detail that will see things drag on further.

In the USA, the US dollar weakened against most of its major counterparts as investors felt happier taking risks. It was noticeable in the fact that the move was a gradual one - i.e. no-one is too sure what to make of the EU summit announcement, other than in principle it is a good thing. Cautious appetite for risk is likely to be the trading pattern today, so if you are buying US dollars, it may be a good time to do so. In addition, there was speculation yesterday that the Federal Reserve would announce another round of Quantitative Easing.

Elsewhere, Japan announced that it would expand its Quantitative Easing by another 5 trillion yen. This was in line with expectations and did lead to some yen buying. In addition, the New Zealand dollar strengthened as Reserve Bank Governor hinted at an interest rate increase.

Supplied by Nick Ryder of Smart Currency Exchange, the currency partner to Harpers Wine and Spirit who have teamed up with Smart to provide readers with a free bespoke currency service. Go to www.smartcurrencybusiness.com/winespirit for more information or call on 0207 898 0500.

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