Sterling falls due to decrease in UK service sector activity

Published: 31 August, 2011

Sterling fell against the US dollar and euro yesterday, due largely to a decrease in the UK's service sector activity over the last three months.

Currency rates - August 31

EURO/GBP - 1.1296
US$/GBP - 1.6305

CHF/GBP - 1.3306

CAN$/GBP - 1.5958
AUS$/GBP - 1.5274
ZAR/GBP - 11.5032
JPY/GBP - 125.03
HKD/GBP - 12.7190

NZD/GBP - 1.9075
SEK/GBP - 10.3688
US$/EURO - 1.4428

Moreover, July consumer credit data showed an unexpected slow down in borrowing; alongside UK net mortgage lending remaining at a standstill. This data continues to demonstrate that economic recovery in the UK is far from robust. As a result, it makes the pound vulnerable and less appealing to investors.

In the Euro zone, the euro fell 0.5% against the US$ and against a majority of its counterparts as there is increasing speculation that the European Central Bank has terminated interest rate hikes for this year. Yesterday's data showed a vigorous decline in Euro zone consumer confidence for a sixth time. This result is largely due to increasing fears of governments' inability to repay their debt. Furthermore, Italian bonds declined for a seventh day.

The US dollar fell to a session low versus the yen as consumer confidence in the US plunged in August, hitting the lowest point in almost two years. Due to this, Americans are becoming increasingly concerned with future job prospects- a sentiment similarly shared by President Obama who recently recruited a top labour economist to tackle the battle against the US's high level of unemployment. U.S stocks also fell yesterday whilst another report demonstrated a fall in home prices for the second quarter.

Elsewhere, the yen benefited from bad U.S consumer confidence data by gaining 0.2% to the US $. On the contrary, Australia saw positive data yesterday as there was a 1% increase in building activity for the month of June.

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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