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Sterling remains strong amid renewed Euro zone fears

Sterling again traded close to a 16 month high against the euro yesterday with investors concerned over the single currency, following further negative news from the euro zone.

Currency rates - January 10

EURO/GBP - 1.2101
US$/GBP - 1.5478
CHF/GBP - 1.4675
CAN$/GBP - 1.5773
AUS$/GBP - 1.5017
ZAR/GBP - 12.5861
JPY/GBP - 118.74
HKD/GBP - 12.005
NZD/GBP - 1.9508
SEK/GBP - 10.6642
AED/GBP - 5.677
US$/EURO - 1.2768
INR/GBP - 80.81

A German magazine reported that the IMF was losing confidence with Greece's ability to deal with its astronomic levels of debt. Sterling has been a major benefactor of investor, 'safe haven' flows in recent weeks. The main event for UK data is the Bank of England's interest rate decision on Thursday, where the Bank is not expected to make any changes to current monetary policy.

Tension over Greece mounted yet again in the euro zone, as the country approaches another debt repayment horizon. With the IMF losing confidence in Greece and Germany and France warning that Greece would get no further bailout funds until it agrees on a bond swap, markets became more and more concerned. Sterling has now stabilised above €1.20/£1 against the euro for the first time since September 2010.

In the USA, investors are starting to trade a new pattern that has emerged. Until recently, strong US data would see investors sell dollars and buy euros and other riskier currencies. However, this correlation has stopped as the euro fell against the euro on Friday's better than expected non-farm payroll figures. Research in the US showed that the Fed is less and less likely to increase Quantitative Easing as the economy continues to recover.

Elsewhere, the Canadian dollar slipped yesterday after data showed that unemployment had risen to 7.5% in December, which contrasts with the USA's relatively strong showing last week. However, this should be a good thing for the Canadian dollar as a stronger US economy would mean higher demand for Canadian goods and services.

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.