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Poor manufacturing figures see sterling drop to 15 month low

Published:  04 July, 2011

Sterling finished last week at a 15 month low against the euro as manufacturing figures drop to a 21 month low.

Sterling finished last week at a 15 month low against the euro as manufacturing figures drop to a 21 month low.


Currency rates - July 4

EURO/GBP - 1.1085
- 1.6112
- 1.3671
- 1.5466
- 1.4998
- 10.821
- 129.88
- 12.538
- 1.9407
- 10.089
- 1.4532

Analysts expect sterling to remain sensitive to economic data given that the Bank of England raised the prospect of further quantitative easing if the UK recovery continues to falter.
The Bank of England is now expected to keep interest rates on hold well into next year.

In the euro zone, finance ministers approved the release of the next tranche of emergency loans to Greece on Saturday, helping Athens to avoid default until September. As a result, EU finance ministers have now pushed back a decision on a second bail out until then so expect to see peripheral debt take a back seat for the next few months and the focus return to interest rates. This week sees the ECB's rate decision and ECB President Jean-Claude Trichet is widely expected to raise interest rates by another 0.25%. 

In the USA, markets are shut today due to the Independence Day long weekend so the currency markets could be quite volatile due to a lack of liquidity. In contrast to the UK, manufacturing figures surprised to the upside on Friday which helped give the US dollar a boost. Later in the week we have factory orders and the major piece of data of the week - non-farm payrolls. US employment data has been poor, so this could be a significant piece of information. In addition, a major issue is the US debt ceiling. 

Elsewhere, the Australian dollar slipped from a 7 week high against the US dollar as retail sales and building approvals slipped in May. In addition, inflation fell meaning that the Reserve Bank of Australia is less likely to raise interest rates at this week's meeting. 


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.