Subscriber login Close [x]
remember me
You are not logged in.

Sterling climbed against US dollar after service sector expansion

Published:  04 August, 2011

Sterling climbed against the US dollar and briefly touched €1.15/£1 against the euro after data unexpectedly showed that services sector activity expanded at the fastest pace in four months.

Sterling climbed against the US dollar and briefly touched €1.15/£1 against the euro after data unexpectedly showed that services sector activity expanded at the fastest pace in four months.


Currency Rates
EURO/GBP - 1.1427
US$/GBP - 1.6357
CHF/GBP - 1.2696
CAN$/GBP - 1.5801
AUS$/GBP - 1.5322
ZAR/GBP - 11.0732
JPY/GBP - 129.97
HKD/GBP - 12.7571
NZD/GBP - 1.9228
SEK/GBP - 10.3811
US$/EURO - 1.4301

While this provided a welcome piece of positive economic data, analysts were keen to point out that the UK recovery is still very fragile. Figures released earlier in the week showed a sharp contraction in the level of manufacturing in the UK. Sterling ended the day up 0.85% against the US dollar and posting 1% gains against the Australian and Canadian dollars. Investors have been disappointed at relatively weak UK economic data over recent months, but some analysts are feeling cautiously optimistic that the UK government's austerity drive will put the economy in a much stronger position than the USA or euro zone.


In the euro zone, the euro strengthened against the US dollar yesterday after stronger than expected retail sales figures provided a welcome boost to the economic prospects of the region. Sales rebounded by 1% after the previous month's contraction. In addition, the euro surged by 2% against the Swiss franc after an unexpected interest rate cut by the Swiss National Bank. The SNB cut interest rates and pumped in liquidity in an attempt to weaken the "massively over-valued" Swiss franc which is at record highs against many currencies following safe haven flows.


In the USA, credit rating agency Fitch affirmed its AAA credit rating for US government debt following Congressional approval of a $2.1trn package of spending cuts, but warned that the US government must cut the debt burden in order to avoid a future default. Poor PMI data saw the US dollar drop to an all time low against the Swiss franc before the SNB's rate intervention. There are concerns that other ratings agencies will downgrade the US on the grounds that the package does not go far enough.


Elsewhere, with the SNB cutting interest rates in Switzerland, markets are poised for the Bank of Japan to follow suit in expanding the size of its asset buying programme. In a similar vein to the Swiss franc, the Japanese yen has surged against other currencies as investors look for safe haven investments.


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.


If you are making or receiving international payments and are interested in talking to Smart please go to SmartWineSpirits.com to get a free no obligation quote or to download the Smart Wine and Spirit report. Alternatively call Smart on 0207 898 0500.

Keywords: