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Sterling climbs due to higher than expected producer price inflation

Published:  09 May, 2011

Sterling climbed against the euro and US dollar on Friday as higher than expected producer price inflation left many speculating that the Bank of England could raise interest rates sooner than expected.

Sterling climbed against the euro and US dollar on Friday as higher than expected producer price inflation left many speculating that the Bank of England could raise interest rates sooner than expected.

Currency rates

EURO/GBP - 1.1352
US$/GBP
- 1.6383
CHF/GBP
- 1.4315
CAN$/GBP
- 1.5786
AUS$/GBP
- 1.5202
ZAR/GBP
- 10.917
JPY/GBP
- 132.14
HKD/GBP
- 12.730
NZD/GBP
- 2.064
SEK/GBP
- 10.208
US$/EURO
- 1.4429

In addition, the initial $11bn float of a commodity trader in London also saw high demand for sterling. In terms of data this week, the markets will be eyeing the Bank of England's quarterly inflation report - due out on Wednesday. This will give clues as to how policymakers expect to balance above-target inflation with stuttering UK economic growth. Poor data last week added to a poor picture of UK economic recovery, leaving many not expecting a rate hike until late 2011 at the earliest. 

In the euro zone, the big news on Friday came just at the close of business in the UK. A report (later denied by the Greek government) in a German newspaper suggested that the Greek government had been in secret negotiations about a possible euro zone exit. This (unsurprisingly) saw the euro plunge against its major counterparts, posting the biggest weekly loss against the US dollar since January. So far today, the currency is a little more stable as Germany's trade balance posted an even higher surplus. Out later this week, there is a wide variety of industrial data finishing with GDP figures on Friday that could see some volatility.

In the USA, the US dollar got a boost on Friday after non-farm payroll figures showed that employers added 244,000 last month - far higher than what economists had expected. This helped risk appetite globally, and was one of the reasons why sterling strengthened on Friday. Out later this week, there is trade balance, inflation and retail sales data.

Elsewhere, the strong US employment figures, combined with strong Canadian employment figures boosted risk appetite and undermined strength for the Canadian and Australian dollars - despite a recent drop in commodity prices.

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.

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