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Sterling strengthens against euro

Published:  03 October, 2011

Sterling strengthened against the euro on Friday, breaking above €1.16/£1.

Sterling strengthened against the euro on Friday, breaking above €1.16/£1.

Currency rates - October 3

EURO/GBP - 1.1626
- 1.5512

CHF/GBP - 1.4135

CAN$/GBP - 1.6288
- 1.6116
- 12.5732
- 119.40
- 12.0892

NZD/GBP - 2.0388

SEK/GBP - 10.7280

US$/EURO -1.3328

The pound rose after the European Central Bank converted several billion euros into sterling for this year's agricultural subsidy, the Single Farm Payment. The euro zone crisis was a key driver of currency exchange last week and as a result of risk averse buying, sterling fell against the US dollar leaving the pound currently trading in the $1.55/£1 range. 

Over the weekend in the euro zone the Greek government approved additional austerity measures for €6.6bn but confirmed that its 2011 deficit target of 7.6% GDP is likely to be missed. In addition, the German government ratified the recent decision on the European Financial Stability Fund. Whilst Greece's announcement is likely to cause concern in the markets, many feel that Greece will still receive the next tranche of bailout funds in the coming days. 

In the USA, the US dollar had a strong day on Friday as it benefited from safe haven demand - i.e. investors look to the safest currency to avoid losing their money. This risk aversion was driven by concerns over the euro zone, but more so by potentially weak manufacturing data from China. With so many relying on China to drive the global economic recovery, faltering growth and soaring inflation in the country is causing concern. 

Elsewhere, Polish authorities intervened last week in the currency markets after the Polish zloty fell to a 27 month low against the euro. This demonstrates the level to which authorities are concerned over the level of growth. 

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.