Sterling slipped on Friday after stronger than expected GDP growth in Europe reinforced the view that interest rates would rise at a faster rate in the euro zone than in the UK.
Sterling slipped on Friday after stronger than expected GDP growth in Europe reinforced the view that interest rates would rise at a faster rate in the euro zone than in the UK.
Currency rates - May 16
EURO/GBP - 1.1464
US$/GBP - 1.6203
CHF/GBP - 1.4400
CAN$/GBP - 1.5740
AUS$/GBP - 1.5321
ZAR/GBP - 11.372
JPY/GBP - 131.01
HKD/GBP - 12.599
NZD/GBP - 2.0642
SEK/GBP - 10.336
US$/EURO - 1.4124
Sterling also slipped against the US dollar, falling below the $1.62/ £1 mark. Stronger than expected GDP growth in France and Germany sets the UK up well in the long term, as you would expect growing economies to see demand for UK exports increase. It is a quiet day for data today, but a fairly busy week ahead. There are inflation figures released tomorrow ahead of the Bank of England's minutes on Wednesday. These are both key pieces of data with reference to the likelihood of a UK interest rate hike.
In the euro zone, the big news over the weekend was the arrest of IMF chief Dominique Strauss-Kahn for an alleged sexual assault. The euro fell to a seven week low against the US dollar as investor risk appetite took a hit and Greece worried that the arrest could postpone a debt restructuring. Strauss-Kahn had been due to meet euro zone finance ministers today to discuss debt-ridden Greece and a potential restructuring of the country's bail out package, and was seen as a key player in negotiations.
In the USA, the US dollar strengthened towards the end of last week as a sharp sell off in commodities hurt risk appetite and saw investors flock to the 'safer' US dollar. At the start of the coming week, the US dollar is likely to remain out of the limelight with the focus on the European finance minister meeting. However, Wednesday sees the Federal Reserve's policy meeting minutes, which are likely to bring the focus back to monetary policy in the USA.
Elsewhere, the Japanese yen was helped on Friday by stronger than expected figures for machinery orders, but the figures are known to be extremely volatile and as such gave no clues as to the impact of the recent earthquake.
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