Currency update July 5: euro gains strength

Published: 05 July, 2010

Currency update for July 5 by Smart Currency Exchange: the euro strengthened this week against both the US dollar and sterling.

Currency Rates, July 5

EURO/GBP - 1.210
US$/GBP - 1.517
CHF/GBP - 1.613
CAN$/GBP - 1.611
AUS$/GBP - 1.801
ZAR/GBP - 11.737
JPY/GBP - 133.25
HKD/GBP - 11.813
NZD/GBP - 2.197
HUF/GBP - 344.98

Sterling hit a month high of $1.5230/ £1 - the strongest since early May - after US Non-Farm payroll data came in far worse than expected and investors dumped the US dollar in favour of sterling. Following the drastic first budget of the new UK coalition government, the pound has taken advantage after a string of lacklustre US data with many analysts feeling better about the UK's chances of cutting the deficit.

Overall the pound finished up 1% against the US dollar, and despite barely holding above €1.20/£1 for most of Friday after the euro performed well, the pound staged a late rally and closed just shy of €1.21/£1.

In the Euro zone, the euro strengthened this week against both the US dollar and sterling after concerns over the liquidity and funding of many European banks turned out to be less of a problem than expected. Higher than expected demand for Spanish bonds and lower than expected demand for European Central Bank emergency funding helped stem concerns over the state of the region as a whole.

In the USA, the US dollar had a traumatic day after US Non-Farm payroll (seasonally adjusted unemployment data) showed a far worse fall in jobs in the region than was initially expected. Data showed a drop of 125,000 versus last month's gain of 433,000.

This followed a string of poor data from the US over the last few weeks that has prompted fears that the US recovery is faltering. There had been expectations at the start of the year that there would be an interest rate rise by the third Quarter of this year.

However, as it stands this looks less and less likely. This is the reason for the poor performance by the US dollar of late. The US markets are closed today for the July 4 holiday, so no data is being released.

Elsewhere, the Australian dollar rose after Asian stock markets gained and reports showed that the Australian labour market was improving. Data out this week is expected to show that employment increased for a fourth month.

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