Sterling hits two-week low

Published: 03 June, 2011

Sterling hit a two-week low versus the euro on Thursday, knocked by downbeat comments from a Bank of England policy maker.

Currency rates - June 3

EURO/GBP - 1.1292
US$/GBP - 1.6342
CHF/GBP - 1.3772
CAN$/GBP - 1.5989
AUS$/GBP - 1.5334
ZAR/GBP - 10.959
JPY/GBP - 131.90
HKD/GBP - 12.706
NZD/GBP - 2.0089
SEK/GBP - 10.151
US$/EURO - 1.4473

AED/GBP - 6.0044

It added weight to the view that domestic interest rates will stay on hold for some time. In addition, the euro gained support following positive comments from German Chancellor Angela Merkel. Sterling did make some ground towards the end of the week, gaining 0.4% against the US dollar to finish towards $1.6393, nearly a cent above an earlier one-week low of $1.6305 - after better than expected construction activity data boosted demand for the pound. Out later today there are services activity figures which could see some movement.

In the euro zone, the euro gained versus the dollar to the highest level in almost a month, finishing the week up over 1% against the US currency. The euro was boosted by the news that euro zone leaders had agreed (in principal) a new three year deal for Greece that would involve further external funding. In addition, German Chancellor Angela Merkel helped to underline support in the currency saying that the European Union remained committed to the euro and that despite the debt crisis, the outlook for German growth looked "very positive". Furthermore - there was speculation this week over a further interest rate hike in the region. It was no surprise then that sterling weakened to below €1.13/£1.

In the USA, the US dollar extended losses against the euro after a run of disappointing data that saw investors shift focus away from Greece and onto the US recovery. Figures this week showed poor factory activity, with orders dropping the most in a year. Labour figures have also been sub-par, and a poor week for the US was topped on Thursday by a warning from credit rating agency Moody's over the USA's sovereign debt rating. A downgrade of the US rating could potentially cause havoc in the markets.

Elsewhere, South Africa's rand and Norway's krone rose the most among the major currencies as commodities advanced. The rand gained 1.1% to 6.7599 per dollar and the krone rose 0.8% to 5.4015 versus the US currency. In addition, the Canadian currency extended its loss against the U.S. dollar as stocks and crude oil, the nation's biggest export, fell.

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