Currency update July 2: sterling's eight week high

Published: 02 July, 2010

Currency update for July 2 by Smart Currency Exchange: sterling jumps to an eight week high

Currency Rates, July 2, AM
EURO/GBP - 1.213
US$/GBP - 1.516
CHF/GBP - 1.620
CAN$/GBP - 1.609
AUS$/GBP - 1.791
ZAR/GBP - 11.679
JPY/GBP - 133.45
HKD/GBP - 11.819
NZD/GBP - 2.193
HUF/GBP - 346.45

Sterling jumped to an eight-week high yesterday against the US dollar of $1.5144/£1 as the dollar fell due to poor manufacturing, housing and employment data.

The pound started the day poorly after lower than expected Chinese manufacturing data cast doubts over the global recovery.
UK manufacturing data showed a drop from 58.0 to 57.5 which added to sterling's woes. However, the pound rallied by over 1% against the US dollar after a similar measure of manufacturing activity in the USA showed the sharpest drop since December 2009.
In addition, poor housing sales data added to the dollar's problems.

Against the euro, the pound weakened after concerns over European sovereign debt eased.

In terms of data, there is construction PMI data out in the UK today which is expected to show a small improvement. There is a lot of volatility in the market and care needs to be taken to avoid buying at the bottom of the market.

In the Euro zone, the euro recovered after a poor start to the week. It was down earlier in the week as financial markets closely followed the repayment of €440bn worth of emergency loans paid out to banks, but in the end the repayment date passed without a hitch.

Credit rating agency Moody's had added to the euro's woes as it downgraded the outlook for Spanish government debt. However, these concerns were eased after a Spanish bond auction for €3.5bn worth of bonds was well received by the financial markets - very much going against what had been expected, especially in light of Moody's downbeat assessment of the situation.

Out later today there is unemployment data and PPI data for the region - both of which have the potential to move the market.

In the USA, following an expiry of tax credits for property buyers, pending home sales dropped by 30% in May and the ISM manufacturing index fell from 59.7 to 56.2 - the biggest fall in activity since December 2009.

The big event of the day though is the US Non-Farm payroll data - out later this afternoon. Most analysts are expecting a fall of over 100,000 jobs on the month, and this data generally sets the tone for the following week's sentiment for both the US economy and the global recovery as a whole.

Elsewhere, the Australian dollar gained overnight after the new Prime Minister Julia Gillard reached an agreement with mining companies over the proposed super tax that was the downfall of the outgoing Premier Kevin Rudd.

* Smart Currency Exchange is currency partner to Harpers Wine and Spirit. Harpers Wine and Spirit has teamed up with Smart to provide readers with a free bespoke currency service.
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