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Currency update, October 14 - Sterling hits a five month low

Published:  14 October, 2010

Sterling hit a 5 month low against the euro on Wednesday as weak consumer confidence data and mixed employment data saw confidence in the pound drop.

Currency Rates
EURO/GBP - 1.136
US$/GBP - 1.601
CHF/GBP - 1.524
CAN$/GBP - 1.599
AUS$/GBP - 1.605
ZAR/GBP - 10.865
JPY/GBP - 130.04
HKD/GBP - 12.424
NZD/GBP - 2.097
US$/EURO - 1.409
HUF/GBP - 309.12

Sterling dropped to €1.1316/£1 but held relatively firm against the US dollar, touching back above $1.58/£1 in late trading.Consumer confidence dropped by nine points to hit the lowest level in more than a year and unemployment data showed that the number of new claims for unemployment benefits rose. On a more positive note, the rate of unemployment dropped to the lowest level in more than a year. With downbeat comments from Bank of England policy maker David Miles on Tuesday, concerns over a weak recovery have caused speculation that the Bank of England will restart monetary easing in the near future.

In the Euro zone, the euro pushed through $1.40/€1 and challenged the 8 month high of $1.4030/€1 as the Federal Reserve minutes released on Tuesday night reinforced expectations of further Quantitative Easing in the USA. Upbeat comments from a key European Central Bank member also helped. Axel Weber - part of the ECB governing council - was talking about exit strategy from loose monetary policy, highlighting the widening gap between US and European monetary policy. Elsewhere, European industrial production increased by more than expected at 1%.

In the USA, the US dollar fell against major counterparts yesterday as the financial markets digested Tuesday night's Federal Open Market Committee minutes. The minutes showed that the FOMC felt that the struggling US recovery might soon need some additional help - validating the assessment that there will soon be further money pumped in to the economy. In terms of data, there is monthly inflation data and also unemployment figures.

Elsewhere, the Australian dollar hit the highest level against the US dollar since 1983 when it was first allowed to float freely on the market. In addition, Japanese yen slipped against the US dollar after investors became concerned that the Japanese government would intervene following a return towards the 15 year high.

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