Sterling falls to 14-month low against dollar

Published: 07 October, 2011

Sterling fell to the lowest level against the US dollar for 14 months yesterday, after the Bank of England announced £75bn of Quantitative Easing to help jump start economic growth.

Currency rates - October 7

EURO/GBP - 1.1540
US$/GBP - 1.5520
CHF/GBP - 1.4280
CAN$/GBP - 1.6134
AUS$/GBP - 1.5834
ZAR/GBP - 12.3315
JPY/GBP - 119.02
HKD/GBP - 12.0880
NZD/GBP - 2.0042
SEK/GBP - 10.5610
AED/GBP - 5.68
US$/EURO - 1.3432

The scale of the additional QE was unexpected and highlighted the precarious state of the UK's recovery as slowing global growth, tax hikes and spending cuts take effect. The flood of increased monetary supply is negative for sterling, with many now expecting sterling to drop into the $1.40's against the US dollar. UK growth in the second quarter has also been downgraded.

The euro held onto marginal gains overnight as the European Central Bank announced new lending measures to provide funding for banks well into next year. Whilst many investors were disappointed that the ECB didn't cut interest rates, stock markets rallied. Yet, there is still a large amount of systemic risk in the region and the risk of large exchange rate movements remains.

In the USA, the US dollar made gains against sterling as investors sold the pound on the news over further Quantitative Easing. Many analysts are wary of growing friction between the USA and China over China's currency peg against the US dollar. US lawmakers are set to bring in legislation to tackle what they feel is hugely undervalued Chinese yuan.

Australia's parliament looks set to join the USA in calling for an enquiry into Asian currency manipulation. Echoing the concerns felt in the USA, the Chinese are coming under pressure for keeping the yuan artificially low to ensure Chinese exports remain cheap. Call in now for a live exchange rate.

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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