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Sterling pushes through €1.26/£1 mark

Published:  09 July, 2012

Sterling gained ground against the euro pushing through the €1.26/£1 level on Friday, a rate last seen three and half years ago.

Sterling gained ground against the euro pushing through the €1.26/£1 level on Friday, a rate last seen three and half years ago.

Currency rates - July 9

EURO/GBP - 1.2592
US$/GBP - 1.5496
CHF/GBP - 1.5135
CAN$/GBP - 1.5789
AUS$/GBP - 1.5210
ZAR/GBP - 12.7614
JPY/GBP - 123.43
HKD/GBP - 12.0162
NZD/GBP - 1.9452
SEK/GBP - 10.8781
AED/GBP - 5.6869
US$/EURO - 1.2298
INR/GBP - 86.80

The high came on the back of the European Central Bank reducing interest rates. However,s lost ground against the US$ as the likelihood in some investors eyes of further US quantitative easing receded on the back of reasonable US non-farm payroll figures released on Friday. Tuesday is the main day for the release of UK data this week. Industrial and manufacturing data for May will be released as will the trade balance for May. Expectations are for a slight narrowing but will still be a £9 billion outflow.


Similar data is released in Europe this week and the data is expected to show the continuing decline in activity and the growing recession in the Euro zone. Trade balance data is going to highlight the disparity between the different countries with Germany expecting an inflow of €13 billion. Quite a contrast to the UK and highlights the might of the German economy. The key driver of the euro's weakness is the yields on Spanish and Italian debt and these will be watched very carefully this week and if they hit the 7% level we could see further weakness from the euro against all currencies.


The US saw the non-farm payroll data released on Friday. This showed the creation of 80,000 jobs against an expectation of 100,000. So a slight disappointment but not enough to undermine US$. This week we have the release of the minutes from the last meeting of the Federal Reserve. This will be carefully read to see if the likelihood of further quantitative easing as the Chairman of the Federal Reserve has made it quite clear that he will do whatever is required to keep the US economy moving forward.


Elsewhere it seems that China will dominate the news flow. China cuts its interest rate to 6% last week as worries over their economy continue. Growth in the second quarter is expected to fall to 7.8% and their trade balance falls slightly to a surplus of US$18.5 billion. Hence the monetary easing by reducing the interest rate.