Sterling makes gains due to further euro zone fears

Published: 09 December, 2011

Sterling hit a one month high against the euro yesterday.

Currency rates - December 9

EURO/GBP - 1.1730

US$/GBP - 1.5636

CHF/GBP - 1.4489

CAN$/GBP - 1.6009

AUS$/GBP - 1.5502

ZAR/GBP - 12.9288

JPY/GBP - 121.46

HKD/GBP - 12.1724

NZD/GBP - 2.0384

SEK/GBP - 10.6314

AED/GBP - 5.746

US$/EURO - 1.3322

The pound was set to make further gains after investors sold the euro on concerns that the ECB had not taken more drastic action to solve the euro zone crisis. Whilst the Bank of England made no further changes to monetary policy this month, the ECB cut interest rates by 0.25% and offered long term lending to banks, but many analysts felt this was not enough. The releases of the minutes from the Bank of England's meeting are expected to show discussions around the introduction of further Quantitative Easing in 2012. QE is normally seen as negative for a currency, but many feel that in the face of the euro crisis, markets may start to reward proactivity from central banks.

In the euro zone, markets were not particularly happy about the lacklustre action from the ECB ahead of the EU summit later today. Yet again, there is an expectation from markets that only a comprehensive solution will suffice, but many are expecting to be disappointed. A clear plan towards fiscal integration is the aim, but most analysts expect a half-baked compromise that will fail do achieve very much.

In the USA, the US dollar has taken a back seat due to the crisis in the euro zone. The US dollar has been a barometer of market sentiment, strengthening against the riskier currencies in the face of the crisis. Released later today is trade balance data, but this is likely to be relatively insignificant compared to what happens in the euro zone.

Elsewhere, the Japanese yen strengthened on the ECB's news, showing that the yen is still a go-to safe haven currency. This morning sterling is performing well against commodity based currencies so call in if you have any currency requirements for those currencies.

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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