Currency update, September 9: investors take a risk

Published: 09 September, 2010

Currency update for September 9 from Smart Currency Exchange: sterling recovered from six week lows against the US dollar after strong housing data and stock market strength that saw global investors buy into riskier assets.

Currency rates, September 9:
EURO/GBP - 1.210
US$/GBP - 1.539
CHF/GBP - 1.563
CAN$/GBP - 1.594
AUS$/GBP - 1.664
ZAR/GBP - 11.138
JPY/GBP - 128.97
HKD/GBP - 11.963
NZD/GBP - 2.120
EURO/US$ - 1.272
HUF/GBP - 348.78

Data released by mortgage lender Halifax showed that UK house prices rose for the second month running in August coming in at a 0.2% rise against expectations of a 0.3% drop. Manufacturing production rose by 0.3% in July taking the annual level to the highest level since 1994 which is helping to rebalance the economy away from debt based growth to manufacturing based growth.

The main data out today is the Bank of England's interest rate decision - released at 12:00pm today. Whilst the market expects rates to stay the same and the emergency funding level to stay at £200bn, a recent run of poor data may reignite the debate about expanding the emergency asset purchasing facility to stimulate the economy. The announcement could potentially see some significant volatility if anything unexpected happens.

In the Euro zone, the single currency fell off against sterling as concerns crept back over the European banking system following an article earlier in the week criticising the European bank stress tests earlier in the year. The 'spread' (the difference in interest paid on government bonds vs. a German bond) increased in Portuguese and Irish bonds as uncertainty increased. Investors closely follow bond spreads and widening spreads indicate uncertainty. Final consumer price inflation for Germany (which came in at 0.0% for the month) is the only real data. Expect the euro to trade on sentiment.

In the USA, the US dollar was not helped by Vodafone as the phone giant sold its minority share in China mobile that resulted in a market moving amount of US dollars being exchanged into sterling - boosting the pound. This triggered 'stop losses' - which are orders at specific levels on the exchange rate - and saw many investors pull out of trades that had been betting against the pound.

Elsewhere, the Central Bank of South Africa is expected to cut interest rates by 0.5% from 6% to 5.5%. However, after recent strong wage data, rates might remain unchanged.

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.

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