Sterling loses ground as UK economy hits new low

Published: 23 September, 2011

Sterling continued to lose ground against the US dollar due to worries about the UK economy reaching its lowest level since December last year.

Currency rates - September 23

EURO/GBP - 1.1395
US$/GBP - 1.5420
CHF/GBP - 1.3930
CAN$/GBP - 1.5795
AUS$/GBP - 1.5694
ZAR/GBP - 12.7240
JPY/GBP - 117.65
HKD/GBP - 12.0280
NZD/GBP - 1.9635
SEK/GBP - 10.5295
AED/GBP - 5.665
US$/EURO - 1.3522

Wednesday's Bank of England minutes made it clear that further quantitative easing was likely and increased speculation over a possible interest rate cut from the current 0.5%. Out yesterday were UK factory export order figures which came in weaker that expected.

In the Euro zone, the euro weakened against the US dollar by 0.9%- the weakest level since January 2011. It also reached a 10 year low versus the yen. The Federal Reserve's announcement which hinted that the global economy is headed for a recession led to increased risk aversion which meant that riskier assets such as the euro were sold. Even with Greece repaying two bond coupons at the start of this week, it has still not been enough to ease concern of Greece defaulting, especially when crucial data came in weaker than expected.

The US dollar made significant gains against a basket of currencies hitting a seven month high versus the euro. After the Federal Reserve's bleak economic outlook, investors retreated to the safe haven US dollar, as is does in times of market turmoil. This weeks Federal Reserve meeting unveiled a strategy called 'operation twist' which could potentially boost the US housing sector by bringing down long term interest rates.

Elsewhere, Australia's dollar depreciated 2.7% against the US dollar. Despite this, Australia's GDP increased more than expected in the last quarter, due to a rise in consumer spending. The New Zealand dollar also extended losses versus the greenback as China's manufacturing figures are predicted to be weak for this month.

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. www.SmartWineSpirits.com

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