Sterling boosted by Spanish bond demand

Published: 02 December, 2011

Sterling strengthened against a weaker US dollar yesterday after risk appetite improved following good demand at a Spanish bond auction.

Currency rates - December 2

EURO/GBP - 1.1641

US$/GBP - 1.5696

CHF/GBP - 1.4380

CAN$/GBP - 1.5910

AUS$/GBP - 1.5347

ZAR/GBP - 12.6690

JPY/GBP - 122.05

HKD/GBP - 12.1980

NZD/GBP - 2.0051

SEK/GBP - 10.6059

AED/GBP - 5.768

US$/EURO - 1.3470

Sterling slipped from earlier highs against the euro after poor manufacturing figures showed that the sector had contracted for a second month in a row. Whilst there is improved risk appetite, sterling could be set for gains against the euro if European policymakers fail to address the crisis effectively in the coming days. This week has seen poor prospects for sterling as the outlook for growth was slashed in George Osborne's autumn statement.

In the euro zone, despite Spain's borrowing costs hitting the highest levels for 14 years, there was widespread relief that the country managed to sell the full amount of debt at a closely watched bond auction yesterday. This was important as it was a key gauge for investors as to market sentiment over Spain's ability to cover its debts. Analysts expect sterling to strengthen over the coming months against the euro as investors move funds into UK government bonds, which remain AAA rated by all major rating agencies.

In the USA, the US dollar slid against the euro for the 4th day in a row as risk appetite steadily improved over the week. With many investors positioning themselves for today's key employment number - non farm payrolls - it was a relatively quiet day for the US dollar. US data has been better than expected this week, which has added to the improving picture for the US recovery.

Elsewhere, the commodity backed currencies have had a strong week making gains off the back of improved risk appetite despite the crisis in Europe. Wednesday's co-ordinated action by central banks to ease the US dollar swap rate improved sentiment globally.

Supplied by Nick Ryder of Smart Currency Exchange, the currency partner to Harpers Wine and Spirit who have teamed up with Smart to provide readers with a free bespoke currency service. Go to www.smartcurrencybusiness.com/winespirit for more information or call on 0207 898 0500.

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