Currency update June 14, strong trade in Asian markets spurs risk appetite

Published: 14 June, 2010

Currency analysis for June 14, 2010 from Smart Currency Exchange, Harpers Wine & Spirit's currency partners.

Currency Rates, June 14

EURO/GBP - 1.204
US$/GBP - 1.466
CHF/GBP - 1.672
CAN$/GBP - 1.514
AUS$/GBP - 1.712
ZAR/GBP - 11.250
JPY/GBP - 134.75
HKD/GBP - 11.427
NZD/GBP - 2.116
HUF/GBP - 337.34

Sterling fell sharply against the euro and US dollar on Friday afternoon as weak industrial output figures left investors concerned that the UK might slip back into recession.

Industrial output was expected to show a rise of 0.4%, but dropped unexpectedly by 0.4%. Manufacturing production also fell. However, in early trading this morning, the pound is up by 0.4% against the US dollar following strong trade in the Asian markets that has spurred risk appetite.

We are seeing large swings in volatility based around risk appetite/aversion - especially in the run up to the emergency budget on June 22. Today sees the release of the first forecast from the newly formed Office of Budget Responsibility. The OBR's assessment is likely to show that the previous government's forecast for growth over the next few years were far too ambitious. This will further press the need for fiscal consolidation.

In the Euro zone, with sentiment towards the region still poor, today's highlight is industrial production data which is expected to have risen 0.5% - the smallest rise in 5 months. While this is unlikely to have a huge impact, investors will be keeping a close eye on the figures over the coming months to see whether a cheaper euro is encouraging overseas sales and helping to prop up domestic demand in the region.

With uncertainty over the UK budget in the next few weeks, we could conceivably see the euro strengthen against the pound this week.

In the USA, a survey showed that consumer confidence in the USA rose to the highest level since January 2008. Even as the debt crisis in Europe has been scaring investors, US consumers are gaining confidence in the US recovery. The boost in confidence has driven Asian stock markets higher and seen demand for the US dollar fall as investors look to more speculative investments. The next major event is the UK's emergency budget - call in now to make sure you buy at the right time and don't lose money.

Elsewhere, New Zealand retail sales fell by 0.3% in April which was more than what had been expected. The NZ dollar wasn't affected though and rose much more than its counterparts as the increase in risk appetite in the Asian markets boosted demand for higher yielding currencies.

Some analysts are expecting the central bank to raise interest rates by nearly 2% over the next 12 months. This is likely to strengthen the currency significantly.

* Smart Currency Exchange is a currency partner to Harpers Wine & Spirit. Harpers Wine & 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: www.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.

* To get currency udpates direct to your email then contact Richard Siddle on

richard.siddle@william-reed.co.uk

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