Sterling strengthens due to weak US employment figures

Published: 11 July, 2011

Sterling strengthened on Friday against the US dollar after weaker than expected US employment figures saw investors reverse bets against the pound.

Currency rates - July 11

EURO/GBP - 1.1279
US$/GBP - 1.5964
CHF/GBP - 1.3373
CAN$/GBP - 1.5400
AUS$/GBP - 1.4910
ZAR/GBP - 10.772
JPY/GBP - 128.91
HKD/GBP - 12.426
NZD/GBP - 1.9141
SEK/GBP - 10.290
US$/EURO - 1.4147

Sterling had hardly moved earlier in the day when figures showed that UK construction struggled and producer price inflation surged to the highest level since October 2008. With UK inflation at 4.5% in May and most domestic utility companies likely to follow Scottish Power's lead in hiking tariffs inflation is likely to top 5% over the summer. It is likely to put mounting pressure on the Bank of England to increase rates far sooner than expected.

In the euro zone, the strong surge that the euro saw in the wake of the Greek austerity vote was brought to an abrupt halt last week as credit rating agency Moody's downgraded Portuguese government bonds to 'junk' status. This raised the concern of further 'contagion' in the region and left investors concerned. Markets will be keeping a close eye on European finance ministers this week and additionally there are the results of European bank 'stress tests' which could see some significant movement.

In the USA, the US dollar plummeted on Friday afternoon as non-farm payroll figures came in woefully under what had been expected. Markets expected the US economy to add in the region of 100,000 private jobs last month, but the actual figure was only 18,000. This week there is important US economic data in the form of US retail sales and US industrial activity data. Retail sales were flat in May and many are expecting both sets of figures to be quite weak.

Elsewhere, there is a raft of Chinese economic data being released this week. 2nd Quarter GDP is set to show a slight drop in the pace of economic expansion, with markets expecting a fall from 9.7% to 9.1%. Inflation is also expected to rise and so be wary of volatility in the commodity backed currencies as China is the world's big buyer of commodities.

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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