Sterling breaks through €1.25 barrier

Published: 14 May, 2012

Sterling briefly broke through the 1.2500 level against the euro on Friday morning; before weakening off against the majority of currencies.

Currency rates - May 14

EURO/GBP - 1.2465

US$/GBP - 1.6079

CHF/GBP - 1.4982

CAN$/GBP - 1.6094

AUS$/GBP - 1.6054

ZAR/GBP - 13.1121

JPY/GBP - 128.69

HKD/GBP - 12.4832

NZD/GBP - 2.0581

SEK/GBP - 11.202

AED/GBP - 5.8974

US$/EURO - 1.2892

INR/GBP - 86.22

Nationwide consumer confidence figures released were worse than expected and the change in the price of goods and raw materials purchased by manufacturers dropped by a lot more than anticipated. The Bank of England inflation report will be the main focus this week as investors will look for signs that further quantitative easing could be implemented in the upcoming months.

The euro had a mixed day on Friday as Spain demanded that its banks hold more capital to guard against "toxic debts" whilst Greece continues to try and form a government. Spanish bond yields have risen once more as fears surrounding the country continue to escalate. Euro zone GDP data is released this week; benchmark 10 year bond auctions in Italy, Germany and Spain; and economic sentiment figures from Germany. Whilst the market will keep an eye on the data released, any news from Greece has the potential to cause a lot of volatility.

The US dollar was relatively strong again on Friday driven by investors seeking a "safe haven" for their money. On the data front, figures released showed that the change in the price of finished goods and services sold by producers dropped by more than expected; but, consumer confidence was better than the markets had predicted.

Elsewhere, the Canadian dollar was one of the best performing currencies as unemployment data released was much better than expected. Disappointing data from China caused yet more fear in the global markets as the world's second largest economy seems to be struggling once more. The Reserve Bank of Australia meeting minutes are released this week and any further indication that interest rates could be cut in the short term could cause the Australian dollar to weaken off again. The other main releases include inflation data from Canada, data showing the change in the price of goods and raw materials purchased by manufacturers in New Zealand and Japanese GDP figures.

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