Sterling still at 13-month high against US dollar

Published: 03 March, 2011

Sterling remained around a 13-month high against the US dollar yesterday as investors continued to speculate that US interest rates would stay in place much longer than the UK.

Sterling remained around a 13-month high against the US dollar yesterday as investors continued to speculate that US interest rates would stay in place much longer than the UK.

Currency Rates

EURO/GBP - 1.1773
US$/GBP - 1.6317
CHF/GBP - 1.5102
CAN$/GBP - 1.5884
AUS$/GBP - 1.6061
ZAR/GBP - 11.1916
JPY/GBP - 133.56
HKD/GBP - 12.715
NZD/GBP - 2.1902
SEK/GBP - 10.2922
US$/EURO - 1.3856

In addition, stronger than expected construction sector activity helped boost prospects for the UK economy and many feel that the Bank of England will have no choice but to raise interest rates sooner rather than later if fundamental data improves as it has done this week. Today's key data release is UK services sector activity which will give a good picture as to whether interest rates are likely to remain set to rise in June as many expect.

In the euro zone, the euro traded around a 4 month high against the US dollar yesterday on expectations of interest rate hikes in the region. Recent comments by key policymakers in the region about monetary policy and high inflation mean that investors are expecting European Central Bank President Jean-Claude Trichet to step up his anti-inflationary rhetoric at today's central bank interest rate meeting. However, given the relative strength of the euro, it could drop off following the meeting regardless of what happens as investors sell on the news.

In the USA, the US dollar continued its recent downward trend yesterday and even strong fundamental figures in the form of better than expected employment figures did not help. The US Federal Reserve remains in 'dovish' mode (i.e. loose monetary policy) which contrasts with the UK and Europe where there is talk of interest rate hikes.

Elsewhere, the New Zealand dollar has had a very poor week, hurt by expectations of an easing of monetary policy by the central bank and concerns over the impact of the recent earthquake.

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