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Sterling remains high due to euro zone debt crisis

Published:  19 July, 2011

Sterling hit a six week high against the euro on Monday as euro zone finance ministers failed to find a solution to the region's worsening debt crisis.

Currency rates - July 19

EURO/GBP - 1.1391
- 1.6109
- 1.3206
- 1.5397
- 1.5115
- 11.213
- 127.32
- 12.554
- 1.9003
- 10.491
- 1.4144

Sterling fell just short of €1.15/£1, gaining significantly from the start of the month when it hit €1.11/£1 against the single currency. Recent figures from Lloyds TSB estimate that sterling is around 20% undervalued against the euro and despite a less-than-rosy outlook for the UK economy, analysts feel sterling's recent run higher versus the euro was unsurprising given the level of negative sentiment towards the euro.

In the euro zone, the euro fell to a record low against the Swiss franc and slid the most in almost a week against the dollar on concern European leaders will fail to agree on a way to contain the region's debt crisis at a summit this week. In addition, Italian and Spanish bond yields jumped to record levels. Markets are concerned that whilst Europe continues to follow the current strategy, contagion fears will spread into peripheral countries such as Spain and Italy.

The US dollar fell to an all time low against the safe-haven Swiss franc as demand for safety rocketed after European Central Bank President Jean- Claude Trichet repeated his opposition to any restructuring of Greek debt. In addition, there were concerns over the lack of apparent movement by Congress in dealing with the nation's looming debt ceiling crisis. However, rumors circulated that parties were inching closer to a compromise over the debt ceiling with many expecting an announcement later this week.

Elsewhere, the Hungarian and Polish currencies both sank as much as 1.7% to their weakest levels against the Swiss franc as the euro-region's debt crisis threatens to hurt the export-led economic recovery in the European Union's east.

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.