Weekly currency round up sees sterling slip

Published: 08 July, 2011

The weekly roundup of currency saw sterling slip against the US dollar and euro on Thursday after the Bank of England kept interest rates on hold.

Currency rates - July 8

This week - (Last week)
EURO/GBP 1.1132 - (EURO/GBP 1.1039)
US$/GBP 1.5972 - (US$/GBP 1.6014)
CHF/GBP 1.3539 - (CHF/GBP 1.3564)
CAN$/GBP 1.5301 - (CAN$/GBP 1.5433)
AUS$/GBP 1.4818 - (AUS$/GBP 1.4961)
ZAR/GBP 10.675 - (ZAR/GBP 10.0835)
JPY/GBP 129.91 - (JPY/GBP 129.26)
HKD/GBP 12.430 - (HKD/GBP 12.462)
NZD/GBP 1.9163 - (NZD/GBP 1.9389)
SEK/GBP 10.099 - (SEK/GBP 10.093)
AED/GBP 5.859 - (AED/GBP 5.9068)
US$/EURO 1.4348 - (US$/EURO 1.4511)

Manufacturing output rose 1.8% in May, after a 1.6% drop in April Industrial output, but this did little to change overall market expectations, which suggest that interest rates will now stay on hold well into 2012 and investors are speculating that it might call on further Quantitative Easing. It raises the prospect that sterling could be used as a "funding currency" in the same way as the Japanese yen - i.e. borrowed cheaply to invest in higher yielding currencies. This could see sterling plummet over the coming months.

In the Euro zone, the European Central Bank increased interest rates by 0.25% as had widely been expected, taking base rates in the region to 1.5%. In addition, the euro gained against the US dollar after ECB President Jean-Claude Trichet eased collateral rules to help local Portuguese banks in the wake of a panic inducing credit rating downgrade earlier in the week. German industrial production came in higher than expected.

In the USA, strong jobs figures helped investors look to riskier assets and sell the US dollar and as such the US currency dropped. Private sector employment increased last month and the number of people claiming unemployment benefits fell by more than expected which helped boost risk appetite ahead of today's 'headline' non-farm payroll number, which is seen as the major measure of unemployment in the USA. Analysts are expecting to see the number of jobs increase by 90,000 for last month, lending strength to the view that the US recovery is poised for a surge in the 2nd half of 2011.

Elsewhere, the Australian dollar stalled earlier in the week as the Reserve Bank of Australia kept interest rates on hold and held off from signaling further rate hikes later in the year. In addition, China raised its own interest rates for the 3rd time this year in an attempt to curb a potential bubble as inflation and growth surge ever onward. This had an impact on riskier currencies.

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. www.SmartWineSpirits.com

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