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Sterling strengthens against dollar, but weakens against euro

Sterling strengthened against the dollar, but weakened against the euro and the Swiss franc as rumours circulated surrounding finalisation of the current Greek bailout package.

Currency rates  - February 8

EURO/GBP - 1.1982

US$/GBP - 1.5911

CHF/GBP - 1.4524

CAN$/GBP - 1.5818

AUS$/GBP - 1.4686

ZAR/GBP - 11.984

JPY/GBP - 122.69

HKD/GBP - 12.3455

NZD/GBP - 1.8991

SEK/GBP - 10.5985

AED/GBP - 5.8442

US$/EURO - 1.3284

INR/GBP - 78.04

Very little data out in the UK today as the market once more awaits developments in Europe and tomorrows meeting of the Bank of England.

The euro strengthened across the board due to a Greek government official stating that Greece was working on a final bailout document.  Greece must complete the full package by February 15 to allow time for the legal procedures to be completed before the potential default day on March 20. Data released yesterday confirmed that the French trade gap had widened to record levels; but, the figures were actually better than many had expected. German industrial production data was also released which came in much worse than expected. The German Finance Minister sought to quash rumours that had been circulating, categorically stating that Germany and France are not working towards pushing Greece out of the EU; however, he did confirm that Germany opposes adding to Greek bailout and that €130 billion is the limit.

The Chairman of the Federal Bank spoke yesterday in the US, debating the US's economic policy with the Senate. The Chairman commented on the state of the economy stating that the recovery is still "frustratingly slow" and that the recovery would last a couple more years; but, he expects a more robust recovery in 2012. The Chairman also mentioned that the Federal Bank expects inflation to "remain subdued" and that it is likely to be below 2% in 2012 and 2013. Furthermore, on the back of positive unemployment data out at the end of last week, he stated that the labour market has "improved modestly" in the past year; but that there was a "long way to go" before the job market started running normally again.

Elsewhere, the main news that took the market by surprise yesterday was the decision by the Reserve Bank of Australia to keep interest rates unchanged at 4.25%. This resulted in the Australian dollar strengthening significantly through the morning with both the £/Aus$ and €/Aus$ exchange rates hitting an all-time low. Also out yesterday, Canada's building permits came in much better than expected and the Swiss National Bank's Interim President reiterated that he won't tolerate the market breaching the €1.20/Chf1 peg.

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.