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Sterling reaches ten week high against euro

Sterling reached a two and a half month high against the euro yesterday afternoon, but fell against the US dollar.

Currency rates - April 5

EURO/GBP 1.2076

US$/GBP 1.5890

CHF/GBP 1.4548

CAN$/GBP 1.5827

AUS$/GBP 1.5438

ZAR/GBP 12.383

JPY/GBP 130.72

HKD/GBP 12.338

NZD/GBP 1.9425

SEK/GBP 10.635

AED/GBP 5.8432

US$/EURO 1.3150

INR/GBP 80.96

The pound started the week strongly against the US dollar reaching a four and a half month high before losing two cents as risk aversion drove the market. Service, manufacturing and construction Purchasing Managers' Index (PMI) figures released this week all beat market expectations boosting positive sentiment towards the UK's economy. More positive data was released as figures showed that house prices increased by 2.2% against the expected 0.3% drop. Today the Bank of England meet and we discover if they have decided to further expand the asset purchase program - expectations are that they won't. The official bank rate is widely expected to remain at 0.5%.

The euro had a poor week against the majority of currencies as concerns rose over the ability of certain southern Euro zone states to fund their debt requirements. A very poor Spanish bond auction yesterday further increased worries following the poor Spanish unemployment figures and the budget announcement earlier in the week suggesting that the debt-to-GDP ratio will rise to the highest level since 1990. The European Central Bank's decision to keep the minimum bid rate on hold at 1% yesterday was widely expected. There is very little data out of Europe for the rest of the week as the market looks elsewhere for influence.

The US dollar has had a fairly strong week as broad based risk aversion drove the market. The Federal Reserve meeting minutes released this week played down the likelihood of further quantitative easing in the world's largest economy. More unemployment data is released today and the influential Non-Farm Payrolls figures are due on Friday where there is no bank holiday in the US.

Elsewhere, the commodity backed currencies had a poor weak with risk aversion being the dominant trading pattern. The Australian dollar was particular poor following an unexpected trade deficit which increased pressure to reduce interest rates from the 4.25% cash rate decision announced on Tuesday. Unemployment figures and PMI data from Canada are the main releases today with very little data out on Friday due to the bank holiday.

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