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Currency update June 17: poor start for sterling

Published:  17 June, 2010

Currency analysis update, June 17 from Smart Currency Exchange: poor day for the pound.


Currency analysis update, June 17 from Smart Currency Exchange: poor day for the pound.

Currency rates, June 17, AM:
EURO/GBP - 1.194
US$/GBP - 1.470
CHF/GBP - 1.645
CAN$/GBP - 1.508
AUS$/GBP - 1.705
ZAR/GBP - 11.194
JPY/GBP - 134.30
HKD/GBP - 11.454
NZD/GBP - 2.110
HUF/GBP - 335.64

Sterling fell yesterday against the US dollar and euro as the pound failed to hold recent gains as renewed fears surfaced over Spain's banking system that reduced risk appetite.

The day started well for the pound, with UK unemployment data showing that the number of people claiming unemployment benefits fell by nearly 31,000 - 7,000 more than expected.

However, there are still considerable headwinds facing the economy such as the pending "fiscal squeeze" that will impact consumers and as such, the unemployment figures did not have as positive an effect as might have been expected.

Sterling has weakened further overnight, as the new Chancellor George Osborne announced the biggest shakeup of financial regulation since Labour came to power in 1997. Under the new scheme, the Bank of England is to have ultimate control of financial supervision. Any new regulation sends jitters through the financial markets and as a result the pound is down this morning. Out later today we have UK retail sales data that is expected to show a 0.1% increase on last month.

In the Euro zone, CPI inflation came in at 1.6% as expected and the euro ended a two-day rally against the US dollar. The European Central Bank announced a further 5% premium on Greek government debt being used as collateral for government loans as Moody's downgraded Greek bonds to 'junk bond' status - the lowest credit rating. There is little other data out today.

In the USA, the focus today will be on CPI inflation data. The forecast is for the figure to fall slightly to 2.0% for May as a result of weaker energy prices. Overall, many analysts are expecting price pressures to remain low over the coming months which could dampen expectations of an earlier than expected interest rate rise. Call in today for an exchange rate - especially if you have US dollars to move into sterling, as we have seen a dip in your favour this morning.

Elsewhere, New Zealand consumer confidence is expected to decline by 3.2% in June according to a recent report. This has seen the likelihood of an interest rate rise at the next Bank meeting fall by about 30% from yesterday according to the Credit Suisse interest rate expectations measure.

* Smart Currency Exchange is a currency partner to Harpers Wine and Spirit. Harpers Wine and Spirit has teamed up with Smart to provide readers with a free bespoke currency service.
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