Currency update, August 26: a quiet day for sterling

Published: 26 August, 2010

Sterling had a fairly quiet day yesterday and remains range bound against the euro and US dollar.

Currency Rates
EURO/GBP - 1.223
US$/GBP - 1.553
CHF/GBP - 1.599
CAN$/GBP - 1.640
AUS$/GBP - 1.751
ZAR/GBP - 11.366
JPY/GBP - 131.51
HKD/GBP - 12.081
NZD/GBP - 2.209
EURO/US$ - 1.270
HUF/GBP - 346.27

With trading volumes still low due to the holiday season any negative surprises could hit confidence in sterling and lead to larger movements than normal. Today sees the release of the CBI Distributive Trade Survey which gives an indication of how retailing activity has faired in August.

The euro was initially well supported on Wednesday after the German IFO business climate (survey for German business sentiment) unexpectedly rose in August. Germany are clearly benefitting from a weaker euro as they are an export driven economy. The euro had been under pressure due to risk aversion as Ireland's sovereign credit rating was downgraded by Standard and Poor. Today sees the release of economic data which should confirm that the pace of contraction in loans to non-financial corporations are continuing to ease.

The US dollar continues to benefit against the euro and sterling as investors pile into safe haven assets due to the uncertainty surrounding the future for the global economy. Today is a relatively quiet day for the US dollar.

Elsewhere the Canadian dollar rebounded from the weakest level in almost two months as equities rallied and crude oil rose. The Canadian dollar is strongly correlated to the price of crude oil as it is its biggest export.

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