Sterling falls against euro and climbs against US dollar

Published: 14 July, 2011

Sterling fell against the euro as data released showed that the number of people claiming unemployment benefits jumped unexpectedly last month.

Currency rates - July 14

EURO/GBP - 1.1358
US$/GBP - 1.6120
CHF/GBP - 1.3150
CAN$/GBP - 1.5475
AUS$/GBP - 1.5024
ZAR/GBP - 11.021
JPY/GBP - 127.41
HKD/GBP - 12.572
NZD/GBP - 1.9083
SEK/GBP - 10.456
US$/EURO - 1.4195

It takes the figure to the highest level since March of last year. The unemployment rate stayed steady at 7.7%. Overall this added to the view that the UK economic outlook is worsening, with the likelihood that interest rates will remain on hold well into next year. Sterling climbed against a weaker US dollar yesterday as US Federal Reserve chairman, Ben Bernanke hinted at the possibility of further monetary stimulus for the US economy.

In the euro zone, the euro had its best day against the US dollar since April, rebounding above $1.41/€1 as news of the potential fresh round of US quantitative easing saw investors look to higher yielding assets in the euro zone. In addition, credit rating agency Fitch said that an ambitious deficit reduction plan from Italy would help stabilise its credit rating. This was seen as positive news for the euro.

In the USA, the US dollar tumbled across the board on the comments from Fed Chairman Ben Bernanke. The Federal Reserve finished the second round of Quantitative Easing in June and a potential fresh set of funding would see the market flooded with cheap money that investors could invest in higher yielding assets elsewhere.

Elsewhere, the higher yielding currencies such as the Australian and New Zealand dollar rose swiftly on the news over potential US monetary stimulus given that these are generally the currencies of choice for carry trades funded by cheap US dollars.

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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