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Sterling rises against dollar due to poor US employment figures

Published:  06 December, 2010

Sterling rose against the US dollar on Friday afternoon after poor US employment figures saw the US currency weaken across the board.

Currency Rates
EURO/GBP - 1.1802
US$/GBP - 1.5699
CHF/GBP - 1.5366
CAN$/GBP - 1.5787
AUS$/GBP - 1.5891
ZAR/GBP - 10.820
JPY/GBP - 130.01
HKD/GBP - 12.190
NZD/GBP - 2.062
SEK/GBP - 10.751
US$/EURO - 1.3299

There were some concerns amongst investors over the UK banking sector's exposure to the euro zone, but this is likely to be more of a story in the new year. Data showed that UK services activity dropped marginally as expected. Many had hoped that it would show an improvement after surprisingly strong manufacturing activity data earlier in the week. It is another relatively busy week with the Bank of England's interest rate decision on Thursday and monthly figures for industrial, trade and producer prices. Whilst the Bank is likely to keep rates on hold, there is likely to be further division between members.

In the euro zone, it was an incredibly volatile week for euro zone government bonds. At one point, Portuguese and Italian bond yields hit record highs relative to German bonds - a measure of the additional 'premium' that these countries need to pay when borrowing from the markets. However, the European Central Bank started buying bonds in large numbers in order to reduce the risk and calm the volatility. There is likely to be further volatility in the coming months as investors look for a long term solution to the debt crisis in the region, rather than the current 'damage limitation' that seems to be taking place at the moment.

In the USA, Friday saw the release of the latest Non-Farm payroll figures - a seasonally adjusted measure of the number of jobs added to the economy in the previous month. The forecast was for an additional 172,000 jobs, and when the numbers showed only 39,000, investors were double checking the figure to ensure there hadn't been an error given the figure was so low. Whilst there may be some kind of anomaly, it still leaves the door open to some potential US dollar weakness.

Elsewhere, the Australian dollar saw some strength after inflation data showed that the annual rate had jumped to 3.9% in the year to November. The rate is currently below $1.60/ £1, so if you have any Australian dollars to move into sterling, now is a relatively good time.

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