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Sterling strengthens due to better than expected UK services sector data

Published:  06 July, 2011

Sterling strengthened against the US dollar and euro yesterday after stronger than expected UK services sector activity data came in better than expected.

Sterling strengthened against the US dollar and euro yesterday after stronger than expected UK services sector activity data came in better than expected.

 

Currency rates - July 6

EURO/GBP - 1.1111
US$/GBP
- 1.6018
CHF/GBP
- 1.3467
CAN$/GBP
- 1.5418
AUS$/GBP
- 1.4943
ZAR/GBP
- 10.789
JPY/GBP
- 129.50
HKD/GBP
- 12.464
NZD/GBP
- 1.9351
SEK/GBP
- 10.056
US$/EURO
- 1.4412

Although further gains looked limited by an overall gloomy outlook for economic growth. Recovering from a three month low in May the services PMI data saw sterling jump a cent against the US dollar to hit a session high of $1.6128/£1 beating forecasts of a fall to 53. Recently, poor economic figures had seen investors reduce bets on a stronger pound, so this news came as a welcome surprise. However, the Bank of England is still expected to keep its main rate unchanged at 0.5% on July 7 when it announces its next monetary-policy decision. 

In the euro zone, the euro dropped for the first time in seven days against the US dollar after credit rating agency Moody's said that banks rolling over Greek bonds into new securities may incur impairment charges. There is a lot of head scratching going on as to the best way to support Greece and many prospective plans are being shot down by rating agencies. The euro also slipped against the safer haven currencies on concerns over China. Later this week, the ECB is forecast to raise interest rates. 

In the USA, the US dollar strengthened against most other currencies on speculation that China's efforts to tame inflation will cool growth and dampen demand for riskier assets. China is likely to raise interest rates to combat inflation that may have reached 6.2% in June, according to market estimates. Another option that may be taken is to manipulate the currency peg to allow the Chinese yuan to appreciate and slow the amount of exports by making the prices higher to overseas buyers. 

Elsewhere, the Australian dollar weakened as the nation's central bank left interest rates unchanged. The Reserve Bank of Australia kept its base rate at4.75% for a 7th straight meeting as signs of slower growth from Europe and China dimmed prospects for acceleration in growth.

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.

www.SmartWineSpirits.com

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