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Currency update June 24: welcome boost for the pound

Published:  24 June, 2010

Currency update June 24: investor concern over the UK eases, resulting in a welcome boost for the pound.

Currency update June 24: investor concern over the UK eases, resulting in a welcome boost for the pound.

Currency rates: June 24 AM
EURO/GBP - 1.218
US$/GBP - 1.495
CHF/GBP - 1.654
CAN$/GBP - 1.555
AUS$/GBP - 1.722
ZAR/GBP - 11.332
JPY/GBP - 134.09
HKD/GBP - 11.639
NZD/GBP - 2.122
HUF/GBP - 344.05

Sterling hit a six week high against the US dollar of $1.4999/£1 after sentiment was given a large boost. Firstly, following the emergency budget on Tuesday, credit rating agency Moody's stated that the UK will retain the AAA credit rating if it successfully implements Tuesday's measures.


In addition, investors were in for a shock when the Bank of England's minutes for this month's meeting on monetary policy showed that one of the Bank members voted for a rise in interest rates - the first time for over two years that anyone has voted for a rate hike.


With VAT set to rise to 20% and a round of tough spending cuts, the affirmation from Moody's should ease investor concern over the UK. As a result, the pound saw a welcome boost.

However, many analysts said that whilst the rise was justified, there are still genuine concerns over the possibility that the cuts and tax hikes could stifle out growth. As a result, many expect that the pound will not have the momentum to push far past $1.50/ £1 for some time. Get in touch now to take advantage of the best price in six weeks.

In the Eurozone, the euro fell against the pound as investors flocked to sterling. The pound hit €1.2189/ £1 at one point yesterday.

Sentiment towards the euro is still poor, as Portugal announced that borrowing from the ECB by banks in the country doubled in May to a new record level. Banks in the region are having to borrow directly from the central bank, as they face difficulties borrowing on the 'interbank' market.


The interbank market is where banks borrow money on a short term basis (eg overnight) to pay obligations. Due to poor sentiment in the region, the interest rates for overnight lending are prohibitively high and banks are going to the central bank for financing. Out today, we have some retail sales and industrial data - call in now for a live exchange rate.


In the USA, the Federal Reserve kept interest rates on hold. And the language in their statement was slightly more pessimistic than last month, suggesting that an interest rate hike by the end of the year will be less likely. This added to the US dollar's losses against the pound. Out later today, we have US durable goods orders which are expected to drop marginally for the month.


Elsewhere, the Australian prime minister has resigned due to unpopularity over a 'super-tax' on natural resources companies. This has boosted mining stocks and has seen some Aus dollar strength overnight, as the threat of punishing taxes on Australia's biggest economic earners has now receded. Get in touch for a live exchange rate.

* 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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