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Currency update, June 4: sterling bouncing back against the euro

Published:  04 June, 2010

Currency analysis for June, 2010 from Smart Currency Exchange, Harpers Wine & Spirit's currency partners:

Currency Rates, June 4, AM
EURO/GBP - 1.200
US$/GBP - 1.464
CHF/GBP - 1.691
CAN$/GBP - 1.521
AUS$/GBP - 1.729
ZAR/GBP - 11.205
JPY/GBP - 135.81
HKD/GBP - 11.414
NZD/GBP - 2.136
HUF/GBP - 336.40

Sterling fell against the US dollar yesterday after mixed data failed to impress the markets. The pound initially strengthened as a survey showed a rise in UK house prices, but then suffered as services sector growth came in worse than expected.

The pound fell to a low of $1.4588/ £1 on the news off a high of $1.4740/ £1. Many analysts cited that any sterling demand following the unwinding of protective positions following the collapse of Prudential's bid for the Asian arm of AIG had now been completed, and as such, this contributed to the pound's decline.

However, sterling performed strongly against the euro and hit €1.2008/ £1 in late trading, as concerns over the outlook for the Euro zone economy outweighed the perceived risk of investing in the UK. Many analysts expect the pound to strengthen to €1.2239/ £1 - a key technical level representing the mid point between the 2007 highs and 2008 lows.

In the Euro zone, the single currency continues to suffer from concerns over the economic outlook related to the region. With sovereign debt a major issue, many investors are looking elsewhere for returns and as such the euro continues to weaken.

Services data showed a mild improvement, but this did nothing to impact on sentiment, and in late trading the euro weakened to fall above the €1.20/£1 mark again. The major data out tomorrow is revised quarterly GDP data, which is unlikely to have a large effect unless it is wildly outside of what is expected.

In the USA, there was a raft of relatively mixed data out yesterday. Non-farm employment showed that the US labour market grew by 55,000 jobs last month which was worse than expected. In addition, unemployment claims stayed the same, and productivity data showed a mild decline.

Out today there is the 'main' measure of unemployment and the Non-farm unemployment rate, which normally see a fair amount of volatility.

Elsewhere, overnight the Australian and New Zealand dollars fell as Asian stocks declined. Selling pressure built as the world's largest copper producer said that China's plans to curb its buoyant economic growth and spiralling inflation would cause a fall in demand for commodities, and as such a fall in demand for the Australian dollar.

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