Sterling drops against euro as UK consumer confidence falls

Published: 20 January, 2012

Sterling dropped below €1.20/£1 against the euro after a survey showed that consumer confidence in the UK fell to the lowest level for seven years.

Currency Rates - January 20

EURO/GBP - 1.1962
US$/GBP - 1.5468
CHF/GBP - 1.4470
CAN$/GBP - 1.5703
AUS$/GBP - 1.4883
ZAR/GBP - 12.3394
JPY/GBP - 119.57
HKD/GBP - 12.0226
NZD/GBP - 1.9328
SEK/GBP - 10.5036
AED/GBP - 5.687
US$/EURO - 1.2948
INR/GBP - 78.01

Concerns over the fragile recovery increase the chances that the Bank of England may look to increase Quantitative Easing as early as next month. Lower inflation earlier in the week had added to this viewpoint. However, Sterling strengthened against the US dollar yesterday tracking gains by the euro against the US currency after strong demand at a Spanish bond auction saw improved risk appetite.

In the euro zone, it has been another turbulent week with the euro making somewhat of a recovery against its major counterparts as bond auctions and data have come in better than expected. So far the single currency is on track for the biggest rise against the US dollar in three months. One potential stumbling block this week has been Greece's renegotiations of its bond repayments. If these talks break down yet again then Greece is likely to have a 'disorderly' default as opposed to the carefully managed one that is being attempted at the moment.

In the USA, the US dollar continues its negative correlation with risk appetite, dropping when markets feel more positive about the debt crisis in Europe. As a general rule of thumb, if there is poor news from Europe, sterling should strengthen against the euro and fall against the US dollar. The opposite is true when there is good news from Europe and a lower likelihood of widescale default.

Elsewhere, figures released overnight showed that Chinese manufacturing has begun to contract, starting 2012 in sluggish mode. As a result the Australian dollar slipped marginally against the US dollar as a result. Call in now for a live exchange rate.

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.

Printer friendly version