Early boost for sterling against US dollar

Published: 27 September, 2010

Currency rates for September 27 from Smart Currency Exchange. For bespoke currency advice go to www.smartwinespirit.com.

EURO/GBP - 1.174
US$/GBP - 1.580
CHF/GBP - 1.559
CAN$/GBP - 1.620

AUS$/GBP - 1.648
ZAR/GBP - 11.084
JPY/GBP - 133.06
HKD/GBP - 12.256
NZD/GBP - 2.155
US$/EURO - 1.345
HUF/GBP - 325.41

Sterling rose against the US dollar towards the end of last week and in early trading so far today.

Sterling reached a high of $1.5842/£1 - a six week high - after poor US housing data added to an already weaker US dollar. Strong business sentiment in Germany helped the euro jump against sterling after the figures came in far better than expected.

So far today, UK house prices have fallen by 0.4% in September according to a survey by property market researcher Hometrack. This is the third consecutive decline in prices and the largest drop in 18 months.

Analysts cited continued uncertainty regarding the economic outlook and concerns over the impact of the coming spending cuts and tax hikes. The rate of decline in house prices is likely to fall as new supply coming onto the market moderates and demand falls. For the rest of the week, keep an eye out for GDP data and consumer confidence figures.

In the Euro zone, the euro had a strong end to the week, strengthening to €1.1750/£1 as German consumer business confidence data came in far better than expected.

There were some worries last week over the Irish economy. Second quarter GDP for Ireland showed a 1.2% decline against an expectation for 0.5% growth which highlighted the struggle being faced by the country and other 'peripheral' European economies.

Out today there is money supply data for the Euro zone, which is expected to show a rise of 0.4% in the year to August. Whilst this is positive, it is clouded by the lack of lending to 'non-financial' entities - i.e. everyone aside from the banks.

This is a key issue globally in that banks have cheap credit available from governments and they have not been passing that on to consumers.

In the USA, data was mixed last week with unemployment claims unexpectedly jumping from 453,000 to 465,000. However, later on data was released that showed existing home sales had increased from 3.8m to 4.1m.

New home sales data on Friday was poor which saw the US dollar finish the week poorly - especially with the prospect of further Quantitative Easing looming. Out this week, there is third quarter GDP released on Wednesday which could see some significant volatility in the build up to the announcement.

Elsewhere, Japan's trade balance surplus shrunk to Y103.2bn as export growth fell for the 6th consecutive month. Exports to the USA and China increased the least since November 2009. The outcome hints that Japan's export led recovery is stalling and that the Japanese government will need to step in yet again to artificially manage the value of the currency in order to promote exports and keep Japanese goods competitively priced.

* Smart Currency Exchange is a 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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