Sterling recovers from 13-month low

Published: 06 May, 2011

Sterling recovered from a 13-month low against the euro on Thursday after European Central Bank President Jean- Claude Trichet signalled interest-rate increases may be delayed.

Currency rates

EURO/GBP - 1.1261
US$/GBP - 1.6393
CHF/GBP - 1.4270
CAN$/GBP - 1.5828
AUS$/GBP - 1.5324
ZAR/GBP - 11.045
JPY/GBP - 131.89
HKD/GBP - 12.742
NZD/GBP - 2.079
SEK/GBP - 10.163
US$/EURO - 1.4554

This saw many investors lose interest in the single currency after speculation earlier in the week had focussed on potential rate hikes in the euro zone as early as next month. Sterling had dropped to €1.1057/£1 early yesterday morning after poor services figures saw confidence in the UK recovery sink even further but ended the day up 1.3%. The figures topped a pretty poor week for UK data in which services, construction and manufacturing activity figures all came in worse than expected. After the drop in CPI inflation to 4.0% in March, the Bank of England kept rates at a record low of 0.5% yesterday in a widely expected move following the run of subdued data that cast doubt on the strength of Britain's economic recovery.

In the euro zone, speculation had been rife this week that the European Central Bank would signal another interest rate hike as early as next month. However, the bank left rates at 1.25 percent at its monthly meeting, having raised them in April to end two years of crisis-induced record low interest rates. As a result of the apparent 'volte-face' by European Central Bank President Jean-Claude Trichet, the euro fell below $1.47 and dropped against sterling as his comments did not signal an imminent interest rate hike as many had expected. Out today, there is German industrial data.

In the USA, figures released yesterday showed a sharp rise in first-time U.S. jobless claims, hitting the highest level in eight months. In addition, poor service sector figures also increased general risk aversion in markets and caused some to worry that a slower U.S. economy could hurt global growth. This week has seen the USA's monetary policy scrutinised, and there is unlikely to be any sort of rate increase for considerable time.

Elsewhere, the South African rand declined to its weakest level in more than a week against the US dollar after commodity prices dropped amid concern global growth is slowing. The Canadian dollar also fell for a fourth straight after the longest losing streak since December as commodities including crude oil tumbled.

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.

If you are making or receiving international payments and are interested in talking to Smart please go to: www.SmartWineSpirits.com to get a FREE no obligation quote or to download the Smart Wine and Spirit report. Alternatively call Smart on 0207 898 0500.

Printer friendly version