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Drop in house prices and poor manufacturing figures affect sterling

Published:  05 May, 2011

Sterling fell to a new 13 month low against the euro yesterday as UK construction data added to Tuesday's poor manufacturing figures and exacerbated sterling's fall.

Sterling fell to a new 13 month low against the euro yesterday as UK construction data added to Tuesday's poor manufacturing figures and exacerbated sterling's fall.

Currency rates, May 5

EURO/GBP - 1.1112
US$/GBP
- 1.6532
CHF/GBP
- 1.4178
CAN$/GBP
- 1.5848
AUS$/GBP
- 1.5410
ZAR/GBP
- 10.997
JPY/GBP
- 132.87
HKD/GBP
- 12.851
NZD/GBP
- 2.085
SEK/GBP
- 10.041
US$/EURO
- 1.4874

In addition, reports showed U.K. house prices fell in April by 0.2%, the first decline in three months, which saw an increase in speculation that the Bank of England will keep rates at a record low. Bank of England policymakers meet tomorrow for their monthly interest rate meeting, and most are expecting the Bank to keep the key rate at 0.5 percent when they announce their next decision tomorrow, according to a Bloomberg survey. However, the Bank of England could surprise everyone and tighten policy.

In the euro zone, the euro remained strong against the US dollar and sterling despite retail sales unexpectedly dropping in the region. The European Union's statistics office Eurostat said retail sales in the 17 countries using the euro fell 1.0 percent month-on-month in March for a 1.7 percent year-on-year drop. Eurostat said the biggest monthly decline in retail sales in the euro zone was in Portugal. The euro rose above $1.49 against the US dollar, its highest level since 17 months, and traders expect an imminent break of $1.50. The ECB, is expected to signal later today that it will increase interest rates in the coming months to keep a cap on inflation, which is why the euro has been so strong of late.

In the USA, the US dollar index fell to a new three-year low after an industry report showed that the pace of growth in US services unexpectedly fell in April. The US dollar index is a measure of the currency's performance against a 'basket' of currencies - it has lost 7.7 percent so far in 2011. Weaker-than-expected U.S. employment data also saw investors increase bets that U.S. interest rates would remain low this year. In addition, the Japanese yen hit a six-week high against the dollar on the poor services sector activity. 

Elsewhere, the New Zealand dollar fell to a two-week low and dropped for a third consecutive day after data from New Zealand showed that permanent migrant departures exceeded arrivals by 530 in March. The currency fell 0.9% to US$0.7913 after touching 79.05, the lowest level since April 20.

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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