Sterling hits five-week high against US dollar

Published: 30 January, 2012

Sterling hit a five-week high against the US dollar on Friday on speculation that agreement would be reached over the weekend in negotiations over Greek debt restructuring.

Sterling hit a five-week high against the US dollar on Friday on speculation that agreement would be reached over the weekend in negotiations over Greek debt restructuring.

However, as we start the week this has not happened yet. In addition, sterling strengthened on Friday against the euro as a member of the Bank of England's monetary policy committee made it clear that a further round of Quantitative Easing in February's meeting was not a done deal. This week sees a wide array of sector activity data in the form of construction, manufacturing and services PMI data which will give a good idea of how the economy is performing. In addition, house price figures will be released.

In the euro zone, the performance of the euro last week was a major indicator of how sentiment has improved in the region. This week's EU summit meeting will bring the issue of the European debt crisis to a fore once again. Key tasks on the agenda include completion of the framework for the 'Fiscal Compact' and formal approval of the European Stability Mechanism. Markets are sceptical that these goals will be achieved. In terms of data, there is Spanish GDP data released today that is expected to show a slight drop - however the focus will remain on Greece/the EU summit.

In the USA, the US dollar stayed under pressure last week after the US Federal Reserve's announcement that it will keep monetary policy loose for another 2 years. The performance of the equity markets will be interesting whilst the EU summit continues. Out later this week we have a wide array of unemployment figures including the headline non-farm payroll figures.

Elsewhere, the Japanese yen has strengthened in the past few days on the much looser monetary policy stance in the USA. The Swiss franc looks more and more vulnerable too. In addition, the South African rand fell away from a three-month high against the US dollar as the EU summit began in Davos.

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 0207 898 0500.

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