Sterling hits low as automatic 'sell' orders triggered

Published: 25 August, 2011

Sterling hit a low of $1.6375/ £1 against the US dollar yesterday as automatic 'sell' orders were triggered.

Currency rates - August 25

EURO/GBP - 1.1342
US$/GBP - 1.6372

CHF/GBP - 1.3038
CAN$/GBP - 1.6165
AUS$/GBP - 1.5658
ZAR/GBP - 11.8848
JPY/GBP - 126.31
HKD/GBP - 12.7688

NZD/GBP - 1.9745
SEK/GBP - 10.3516
US$/EURO - 1.4421

The euro also climbed against sterling by 0.5%. Investors suspect that sterling will struggle today and find direction only after Friday's speech by Federal Reserve Chairman Ben Bernanke, in which he is expected to announce further monetary stimulus. Out today is CBI survey on retail sales and the second quarter estimate of GDP on Friday. There is worry that if data indicates fragmented UK recovery, the likelihood of the Bank of England adopting another round of quantitative easing will increase.

In the Euro zone, the Euro made slim gains against sterling and the US dollar. Further German manufacturing data came in better than expected, but it was the weakest rate of expansion for the past two years. Concern over the European debt crisis is causing European banks to cut their workforces six times faster than their US counterparts. The euro strengthened also off the back of speculation ahead of Fed Chairman Ben Bernanke's speech - further monetary easing would see a flood of cheap US dollars being invested elsewhere.

In the USA, the US dollar traded at a record low against the yen yesterday falling by 0.2%. This was due to a large number of market players ignoring a program which urged firms to exchange yen for foreign assets. Data for the USA came in better than expected showing that durable goods orders climbed in July. Home prices increased by 0.9% in June. Despite this, property prices dropped by 5.9% compared to this time last year. There is concern that U.S consumer business will continue to weaken in comparison to markets such as China which continue to grow.

Elsewhere, the Swiss franc gained against a number of currencies rising for the first time in three days against the US dollar. This is largely due to a decrease in German business confidence and an increase in Greek bond yields. There is speculation that an interest rate hike is now unlikely to happen in South Africa as South African four year bonds fell, gaining an upper hand on the US dollar.

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