Sterling holds ground, but concerns are renewed over double-dip recession

Published: 04 January, 2012

Sterling strengthened marginally against the US dollar yesterday after better than expected global data helped improve risk appetite and gave support to the pound.

Currency rates - January 4

EURO/GBP - 1.1975

US$/GBP - 1.5631

CHF/GBP - 1.4618

CAN$/GBP - 1.5851
AUS$/GBP - 1.5095
ZAR/GBP - 12.6140
JPY/GBP - 119.97
HKD/GBP - 12.1671

NZD/GBP - 1.9820

SEK/GBP - 10.6684

AED/GBP - 5.752

US$/EURO - 1.3062

INR/GBP - 82.91

UK manufacturing sector activity improved by more than expected but still showed the sector contracting, pointing to signs of a 'double-dip' recession in the coming months. Whilst sterling has benefited against the euro due to the European debt crisis, many feel that this 'safe haven demand' is glossing over cracks in the UK economy that could see it enter recession again in 2012.

The euro strengthened slightly against the US dollar and sterling yesterday after German unemployment figures came in far better than expected. Data showed that unemployment fell by 22,000 to 13,000. Despite this boost to risk appetite, persistent worries over high sovereign debt levels in the region and a lack of solutions to a crisis that is now entering its third year are set to keep the euro under pressure.

In the USA, better than expected manufacturing figures saw the US dollar slip off as risk appetite increased. In addition, data showed an increase in spending on construction. The minutes from the Federal Reserve's recent meeting yesterday evening showed that the Fed will now publish its interest rate forecasts in a bid to become more transparent.

Elsewhere, tension is increasing in the Gulf as new US and EU sanctions take their toll on the Iranian economy. The Iranian riyal has fallen by nearly 40% against the US dollar in the last month as investors scramble to move savings into US dollars to protect themselves. There were also concerns as Iran threatened to take action against the US Navy if it moves an aircraft carrier back into the Persian Gulf, which has seen oil prices jump on fears over supply.

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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