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Strong performance from sterling this week

Published:  20 April, 2012

Sterling performed extremely well this week reaching a 20-month high of 1.2250 against the euro, a five-month high against the US dollar of 1.6075 and strengthened against the majority of other currencies.

Currency Rates

EURO/GBP - 1.2216

US$/GBP - 1.6057

CHF/GBP - 1.4683

CAN$/GBP - 1.5981

AUS$/GBP - 1.5541

ZAR/GBP - 12.561

JPY/GBP - 131.09

HKD/GBP - 12.464

NZD/GBP - 1.9741

SEK/GBP - 10.791

AED/GBP - 5.8955

US$/EURO - 1.3145

INR/GBP - 82.51

The main news this week was that the Bank of England's policy meeting minutes revealed that one less MPC member voted to increase quantitative easing compared to last month which saw sterling rally against the majority of currencies. Furthermore, figures this week showed that the number of new people claiming unemployment benefits rose by less than expected and the unemployment rate also dropped. Monthly retail sales figures are the main release on the agenda today; we will have to see if the figures support the positive sentiment towards sterling this week.

The euro ended the week fairly strong against the majority of currencies apart from sterling despite a raft of poor data released. Fears that Spain could become the new Greece were at the forefront of trader's minds this week. Worse than expected Eurozone current account figures and poor expected Eurozone confidence did little to help matters. Furthermore, the International Monetary Fund lowered Europe's growth forecasts to a contraction of -0.3% in 2012 and Spain is expected to contract by -1.8%. The main data released today will b German business climate sentiment data which will go some way to show the present confidence from the region's largest economy. With the main focus remaining on the developments in Spain there is the potential for large movements in the market.

The US dollar had a mixed week as the positivity in the US at the start to the week due to better than expected retail sales figures and building permits was countered by a raft of disappointing data including weekly jobless claims figures and existing home sales. The IMF raised global growth estimates in 2012 from 3.3% to 3.5%; also, raising the US growth estimate from 1.8% to 2.1%. There is very little data out of the US today as the markets will look elsewhere for influence.

Elsewhere, there was a raft of information out this week which included the Bank of Japan hinting that it will expand its easing program. Sweden's central bank announced that it was keeping interest rates on hold at 1.5%. The Bank of Canada left the central bank rate unchanged and suggested that economy will be stronger in 2012 than it had originally forecast. The Reserve Bank of India cut its central bank rate by 50 basis points. The Reserve Bank of Australia meeting minutes suggested that interest rates could be cut if inflation remains low. China announced that it will now allow its currency (the RMB) to fluctuate up and down by 1% against the USD. The Core Consumer Price Index figures from Canada is the main release today after a busy week.