Sterling dragged down by euro weakness

Published: 10 May, 2011

Sterling fell to its lowest in nearly three weeks against the US dollar yesterday.

Currency rates - May 10, 2011

EURO/GBP - 1.1427
US$/GBP - 1.6361
CHF/GBP - 1.4375
CAN$/GBP - 1.5773
AUS$/GBP - 1.5205
ZAR/GBP - 11.044
JPY/GBP - 131.91
HKD/GBP - 12.705
NZD/GBP - 2.066
SEK/GBP - 10.272
US$/EURO - 1.4315

It was dragged down by euro weakness against the US dollar as a downgrade of Greece's credit rating. Sterling dropped to a low of $1.6270/ £1 - the lowest since April 19. In a quiet day for UK data, the market focus was very much on the euro zone, but there are key figures released on Wednesday from the Bank of England's quarterly inflation report. A poor run of figures last week put a dampener on expectations that the Bank of England will increase interest rates before the end of 2011.

In the euro zone, the euro fell against the US dollar yesterday, hitting its lowest level in nearly three weeks after credit rating agency Standard and Poor's cut Greece's debt rating to near junk bond status. S & P stated that it was increasingly likely that Greece would need to restructure its debt, as other European countries would be putting the holders of Greek debt under pressure to accept later repayments to loosen up the terms of the bailout and protect market sentiment.

In the USA, the US dollar saw a boost from risk aversion related to a re-emergence of the Greek debt crisis after the credit rating downgrade. Out later today, there is import prices and economic optimism figures. In addition, a member of the Fed's policy making team speaks at a conference in St. Louis, which could potentially have an impact.

Elsewhere, the Canadian dollar reversed advances against its U.S. counterpart after the Greek rating cut, as global demand for 'riskier' assets slipped following the announcement. In a similar vein, the South African rand weakened against the US dollar falling as much as 0.6% to 6.7471 per dollar, and traded 0.5% weaker at 6.7380.

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