Currency update, July 20: sterling hits seven week low

Published: 20 July, 2010

Currency daily update for July 20 from Smart Currency Exchange: sterling fell yesterday against the euro to hit a seven week low.

Currency rates, July 20:
EURO/GBP - 1.177
US$/GBP - 1.529
CHF/GBP - 1.608
CAN$/GBP - 1.605
AUS$/GBP - 1.737
ZAR/GBP - 11.606
JPY/GBP - 132.82
HKD/GBP - 11.885
EURO/US$ - 1.298
NZD/GBP - 2.135
HUF/GBP - 340.31

Sterling fell yesterday against the euro to hit a seven week low against the euro as higher demand for the single currency saw investors cut short positions in the currency - particularly against the pound. Sterling hit a low of €1.1724/ £1, as a quiet day for UK data releases left investors trading on European news.

Rumours circulated over the weekend that China is looking to bolster its foreign currency reserves with large amounts of euros and a large buy order in early trading saw many investors jump on the euro band wagon. Despite comments over the weekend from Andrew Sentance (a Bank of England policymaker) in which he reiterated his comments that the UK needed to raise interest rates sooner rather than later, traders preferred to wait until the Bank of England's minutes from this month's meeting are released on Wednesday. That release, alongside the GDP first estimate on Friday, forms the only significant data this week.

In the Euro zone, despite trade balance data unexpectedly showing a widening in the trade deficit, the euro had a bumper day. Initially, the euro weakened after rating agency Moody's cut Ireland's credit rating by one level citing a 'significant loss of financial strength'. However, optimism over the results of European bank stress testing (the results of which are released on Friday) helped drive the euro forward.

In the USA, the US dollar fell against the euro following the optimism over the stress testing. However, the euro levelled out as many analysts are concerned that the results will show that the region needs more help. In addition, the US economy's poor run of data continued, with a key piece of data on the housing market coming in lower than expected. The NAHB/ Wells Fargo Housing Index fell to the lowest level since April 2009. There is building permit data released tomorrow which should give a further idea of the state of the US property market.

Elsewhere, minutes from the reserve bank of Australia's recent meeting were positive. The bank saw signs that private demand was growing and also argued that some moderation in demand in Asia would be positive for the Australian economy.

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