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Sterling becomes flavour of the month

Published:  03 May, 2012

Sterling continues to be flavour of the month benefiting from figures that showed the UK construction industry expanded in April and from poor economic data elsewhere.

Currency rates, May 3:

EURO/GBP - 1.2307
US$/GBP - 1.6176
CHF/GBP - 1.4792
CAN$/GBP - 1.5941
AUS$/GBP - 1.5702
ZAR/GBP - 12.501
JPY/GBP - 129.81
HKD/GBP - 12.5528
NZD/GBP - 2.0006
SEK/GBP - 10.921
AED/GBP - 5.9432
US$/EURO - 1.3141
INR/GBP - 86.12

The growth in the construction figures was not as great as for March but was still an important set of data as the construction sector was a key factor in the negative growth figures for the first quarter of this year.

We are seeing the euro at its lowest level against sterling for over two years with the euro suffering as euro zone manufacturing output contracted sharply. Manufacturing has slowed in April to its weakest level in nearly three years and German manufacturing fell for the first time since December 2011.

The lack of business confidence and the debt problems continue to adversely affect the euro. Today we have the European Central Bank meeting announcement. Given the poor state of the euro zone economy there is even talk of cutting interest rates.

The US dollar gained on increased risk aversion following bad economic data at home and in the euro zone. US private employers added fewer jobs than expected in April. Tomorrow we have the hugely influential non farm payroll data so we are likely to see increased volatility while we await those figures.

Elsewhere the Australian dollar continues to be under pressure following the surprise announcement of a 0.5% interest rate cut. Clearly the economy is not performing a hoped and inflation is being held within acceptable levels. However the interest rate of 3.75% is still the highest of the industrialised "G10" nations.