Sterling drops back against euro

Published: 20 June, 2012

Sterling had a mixed day yesterday weakening by 0.75 cents against the euro but strengthened against the U S dollar and Japanese yen.

Currency rates - June 20

EURO/GBP - 1.2393
US$/GBP - 1.5726
CHF/GBP - 1.4891
CAN$/GBP - 1.6026
AUS$/GBP - 1.5429
ZAR/GBP - 12.8865
JPY/GBP - 124.16
HKD/GBP - 12.2061
NZD/GBP - 1.9775
SEK/GBP - 10.9615
AED/GBP - 5.7741
US$/EURO - 1.2684
INR/GBP - 87.90

A much lower than anticipated Consumer Price Index (CPI) inflation data weakened sterling in the morning which led to increased speculation that the Bank of England could look to inject more money into the economy in July. The MPC meeting minutes released today will show how close the Bank of England were to increasing quantitative easing in June with the decision expected to be a very close call.

The euro performed well yesterday despite German and Eurozone economic sentiment figures coming in much lower than expected. The euro strengthened as rumours started to circulate that the EU may allow Greece some extra time to meet the targets set to receive the next tranche of its bailout package. Spanish benchmark 10 year bonds yields retraced back below the 7% mark providing some respite to the nation; however, 12 and 18 month bills were sold with yields well above the rate paid in May. With very little data released in Europe today, the markets will look elsewhere for influence whilst still keeping a close eye on any developments in Greece and Spain.

The US dollar had a particularly poor day yesterday weakening off against the majority of currencies as speculation began to mount that further quantitative easing could be implemented shortly. On the data front, the number of new residential building permits granted grew by slightly more than anticipated. The dollar continued to be sold off in anticipation of what could be included in the Federal Open Market Committee's (FOMC) press conference, economic projections and monetary policy statement released today.

Elsewhere, the Japanese yen had a poor day yesterday weakening off against the majority of currencies. The latest Australian monetary policy meeting minutes said the decision to cut interest rates last month was "finely balanced".

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