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Sterling benefits from heavy selling

Published:  10 January, 2011

Sterling had a strong day on Friday, closing above 1.20 against the euro after the biggest weekly gain against the single currency since mid-November 2010.

 

Sterling had a strong day on Friday, closing above 1.20 against the euro after the biggest weekly gain against the single currency since mid-November 2010.

Smart Currency Daily Rates

EURO/GBP - 1.2028

US$/GBP - 1.5508

CHF/GBP - 1.4963

CAN$/GBP - 1.5443

AUS$/GBP - 1.5637

ZAR/GBP - 10.6130

JPY/GBP - 128.98

HKD/GBP - 12.059

NZD/GBP - 2.0421

SEK/GBP - 10.744

US$/EURO - 1.2889

 

Sterling benefitted from heavy selling of the euro as concerns over the debt crisis increased. After weaker than expected services and construction data earlier in the week, sterling took advantage as borrowing costs for Portugal, Spain and Italy went up ahead of an important week for European Government borrowing. It is a quiet start for data in the UK this week before the Bank of England's interest rate meeting on Thursday. Whilst inflation is still stubbornly high and markets are expecting an interest rate hike at some point, this is unlikely to happen this week as the Bank will probably wait and see what impact the VAT increase and spending cuts has before changing current policy.

 

In the Euro zone, a large sell off of European 'periphery' bonds, an EU proposal on lending and poor German retail sales data saw the euro slump to a 4 month low against the US dollar and drop below 1.20/ £1 against sterling. The EU proposal outlined plans to force those who lend to banks to accept losses should the banks fail and insurance against default for Spanish and Portuguese neared record highs. Analysts said there is scope for further euro losses this week so call in now for a live exchange rate - especially as the news overnight is that Portugal is now under pressure to accept a bailout.

 

In the USA, following better than expected private jobs figures on Wednesday, there were expectations of big numbers on the Non-Farm payroll data. However, this failed to materialise but 103,000 new jobs were added and the unemployment level fell to 9.4%. The US dollar fell marginally against sterling.

 

Elsewhere, it seems that investors have finally woken up to the realization that the Australian economy is not an invincible bastion to keep throwing money at. The worst flood in half a century and active efforts by China to curb growth mean that Australia's export of commodities is likely to suffer. There are employment figures released this week which could come in worse than expected and kick start the Aussie dollar on a downward spiral.

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.

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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