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Currency update June 9: sterling recovers some of yesterday's losses

Published:  09 June, 2010

Currency update for June 9 from Smart Currency Exchange, currency partners for Harpers Wine & Spirit.

Currency Rates: June 9
EURO/GBP - 1.211
US$/GBP - 1.448
CHF/GBP - 1.667
CAN$/GBP - 1.520
AUS$/GBP - 1.755
ZAR/GBP - 11.210
JPY/GBP - 132.43
HKD/GBP - 11.300
NZD/GBP - 2.176
HUF/GBP - 342.57

Sterling fell 1% yesterday against the euro breaching €1.20/ £1 as credit rating agency Fitch warned over the UK deficit. Fitch - which is one of the agencies responsible for the credit rating of a country's debt - said that the challenges facing the UK in order to maintain its AAA rating were "formidable".

The comments caused concern in the markets, and the pound dropped below $1.44/ £1 and slid to €1.1988/ £1. However, many analysts said that the statement offered nothing new, and simply brought the deficit back into the spotlight ahead of the emergency budget on June 22.

As a result, sterling has recovered some of yesterday's losses this morning - helped by the FTSE which opened 0.5% higher. Elsewhere, the UK trade deficit has stayed at £7.3 billion despite an expected improvement to £7.0 billion. Also, retail sales data showed a mild decline in price inflation.

In the euro zone, yesterday saw some positives on the data front. German industrial production unexpectedly jumped to 0.9% and investor confidence improved - albeit marginally, while the German trade surplus dropped marginally.

Aside from this, there was little to improve on the poor sentiment towards the euro zone, as many public sector workers went on strike in Spain to demonstrate against the harsh cuts that have been imposed by the recent "austerity measures".

In the USA, the US dollar strengthened again yesterday following the comments from Fitch. Risk aversion is the major driver of sterling/ US dollar prices at the moment and even though yesterday's comments added nothing new to what the markets already knew about the UK deficit, the comments brought the deficit back into the spotlight.

In terms of data, data on economic optimism showed a decline. Out today, there is crude oil inventory data and Fed Chairman Ben Bernanke testifies to the senate. The US dollar has declined slightly this morning.

Elsewhere, Australian home loans fell for the seventh consecutive month as mortgage rates increased following a 1.5% increase in the interest rate over the last seven months. In addition, there is speculation that New Zealand will see the first interest rate hike since 2007 later this evening. The decision is expected at 9pm GMT. This is likely to cause the pound to weaken against the NZ dollar.

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