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Sterling held back against euro, but hits high against dollar

Published:  25 July, 2011

Sterling was held back last week against the euro by poor economic growth as interest rates rise at a faster rate in the euro zone.

Sterling was held back last week against the euro by poor economic growth as interest rates rise at a faster rate in the euro zone.

Currency rates - July 25

EURO/GBP - 1.1344
- 1.6307
- 1.3142
- 1.5505
- 1.5070
- 11.094
- 127.59
- 12.704
- 1.8852
- 10.346
- 1.4369


This week sees the first estimate of UK GDP for the 2nd quarter which many analysts expect to show minimal growth of 0.1% against a first quarter figure of 0.5%. Many analysts are warning that there could be a 'downside surprise' - meaning it could come in much lower than 0.1%. However, sterling performed well towards the end of last week against the US dollar as investors celebrated a second round bailout of Greece. The pound hit the highest levels against the US dollar since late May as investors backed the UK's fiscal plan over Europe or the USA.

In the euro zone, whilst last week's bailout plan for Greece was widely celebrated by the markets, there is concern that it is only a temporary solution which fails to address the core issues. The plan is heavily reliant on Greece meeting obligations on spending and tax - something it has already failed to do on the first bailout. Key changes to the European bailout fund will not be debated by the German parliament until September, leaving further uncertainty. Released this week there is euro zone inflation data that is expected to creep up further towards 3%, which is likely to keep the pressure on the ECB to increase interest rates later in the summer. 

In the USA, despite announcements last week that Congress had reached agreement over a deal to cut the country's deficit and raise the debt ceiling, Washington yet again failed to reach an agreement over the weekend. UK Business Secretary Vince Cable blamed several "right wing nutters" for creating "the biggest threat to the world's financial system". President Barack Obama insists that any plan must be a long term one that will address the US government's spending well beyond the next Presidential election. 

Elsewhere, the political deadlock in Washington has seen safe haven assets spike in price this morning, with gold and the Swiss franc attracting high demand as investors weigh up the prospect of a US debt default.

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.