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Sterling strengthens as 'slight' UK growth predicted

Published:  13 June, 2012

Sterling strengthened by one cent against the euro and the US dollar yesterday as estimates from the National Institute of Economic and Social Research GDP suggested UK saw a slight growth of 0.1%.

Sterling strengthened by one cent against the euro and the US dollar yesterday as estimates from the National Institute of Economic and Social Research GDP suggested UK saw a slight growth of 0.1%.

 

Currency rates -  June 13

EURO/GBP - 1.2418
US$/GBP -
1.5544
CHF/GBP -
1.4930
CAN$/GBP -
1.5968
AUS$/GBP -
1.5618
ZAR/GBP -
13.0484
JPY/GBP -
123.79
HKD/GBP -
12.0607
NZD/GBP -
1.9998
SEK/GBP -
10.9828
AED/GBP -
5.705
US$/EURO -
1.2506
INR/GBP -
86.75

 

The estimated growth is over the three months, but NIESR figures are only estimates and the UK is still officially in a double dip recession. However, it provides some hope for the state of the UK economy. Contrary to this data, the monthly manufacturing production figures were much worse than expected, contracting by 0.7% when a flat 0.0% figure was expected. Many economists suggested these figures tell a more accurate story than the NIESR and that the UK could fall into a deeper recession meaning further quantitative easing could be required to try and boost the economy.



The euro had a very poor day weakening against the majority of currencies following news that Fitch (one of the big three credit rating agencies) had downgraded 18 Spanish banks. More bad news came as the Cyprus finance minister suggested the country may need a bailout to help its failing economy. Moreover, Spanish and Italian bonds pushed ever closer to the 7% level which is viewed as the level at which government debt repayments become unsustainable. The main release today will be the benchmark 10 year bond auction from Germany which is expected to have its yields driven even lower as investors seek save havens for their money.



The US dollar had a fairly mixed day yesterday with the focus remaining on Europe and the releases from the UK. On the data front, monthly import prices came in as expected; but, very little else was released. It is a busy day on the data front today with retail sales figures and the monthly Producer Price Index (PPI) headlining the economic calendar.



Elsewhere, the Australian dollar and New Zealand dollar continued to perform fairly well yesterday whilst the Japanese yen was particularly weak following remarks from the IMF that it was "moderately overvalued from a medium- term perspective." The Governor of the Reserve Bank of Australia was speaking late last night whilst consumer sentiment figures were also released. Late this evening we have the official rate decision, press conference and monetary policy statement from the Reserve bank of New Zealand which is expected to reveal the 2.5% base rate has been kept on hold.




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