Sterling loses ground as worries over UK economy continue

Published: 03 August, 2012

Sterling has lost ground across the board this week as worries over the state of the UK economy continue, including the possibility that it may lose its AAA credit rating.

Smart Currency rates & comments - August 3

This week - (Last week)
EURO/GBP 1.2724 - (EURO/GBP 1.2758)
US$/GBP 1.5522 - (US$/GBP 1.5675)
CHF/GBP 1.5297 - (CHF/GBP 1.5328)
CAN$/GBP 1.5604 - (CAN$/GBP 1.5828)
AUS$/GBP 1.4794 - (AUS$/GBP 1.5042)
ZAR/GBP 12.9650 - (ZAR/GBP 12.9145)
JPY/GBP 121.48 - (JPY/GBP 122.72)
HKD/GBP 12.0434 - (HKD/GBP 12.1620)
NZD/GBP 1.9082 - (NZD/GBP 1.9532)
SEK/GBP 10.5401 - (SEK/GBP 10.7591)
AED/GBP 5.7048 - (AED/GBP 5.745)
US$/EURO 1.2193 - (US$/EURO 1.2278)
INR/GBP 87.06 - (INR/GBP 86.95)

We did see a better day for sterling against the euro. This was on the back of news elsewhere, rather than any significant UK economic data being released. The Bank of England decided to sit on its hands and keep interest rates on hold and not increase their programme of quantitative easing. This wasn't a surprise to the markets and therefore had little effect on sterling.

The euro suffered as the rhetoric of last week from the President of the European Central Bank wasn't supported by the announcement following their monthly meeting. A case of under delivering as the markets had reacted very positively to last week's statement that the ECB would do whatever it would take to support the euro. As a result we saw the euro lose ground across the board and yields on Spanish and Italian debt leap up.

The US continues to benefit from the problems in Europe even though there was a lack of any real news in the US yesterday. Today we have the release of the highly influential non-farm payroll data which is expected to show an increase of 97,000. US unemployment is expected to stay at 8.2%. As this week's data has shown the US economy is hardly in robust shape and there is very much an expectation of further quantitative easing in September as the Federal Reserve decided to keep its powder dry at this month's meeting.

The Australian dollar continues to gain ground pushing to the lower end of its two year range against sterling. Only a month or so ago it was at the top end as worries over the Chinese economy were to the fore.

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