Subscriber login Close [x]
remember me
You are not logged in.

Rise of sterling hampered due to UK recovery concerns

Published:  16 August, 2011

Sterling gained against the US dollar yesterday, but failed to break beyond $1.64/£1 due to concerns about the UK recovery.

Sterling gained against the US dollar yesterday, but failed to break beyond $1.64/£1 due to concerns about the UK recovery.

Currency rates - 16th August 2011

EURO/GBP - 1.1346
- 1.6321
- 1.2735
- 1.6055
- 1.5642
- 11.6730
- 125.37
- 12.7269

NZD/GBP - 1.9635
- 10.5012
- 1.4381

Selling from sovereign investors has also hampered its efforts. Figures showed that asking prices for residential property fell this month from a year earlier for the first time since September 2009 dropping by 3.4% in London, underlining the patchy recovery despite high inflation. Investors expect the Bank of England to keep interest rates at record lows into 2013. There is also a growing feeling that we may see another round of quantitative easing.

In the euro zone, the euro gained to a three week high against the US dollar, strengthening as investors expected a positive outcome to today's meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel to discuss the debt crisis. But gains are likely to be capped by persistent worries over the region's banking sector and a perceived risk to France's credit rating. In addition, the euro was helped by large gains against the Swiss franc on speculation that the Swiss currency would be pegged against the euro in an attempt to weaken the Swiss franc and help Swiss exporters.

In the USA, stock markets rose following a three-week drop for the S&P 500 Index on improved risk appetite, but data showing foreigners were net sellers of all US assets in June for a second straight month and poor manufacturing figures weighed on dollar sentiment. In addition, Vice President Joe Biden is expected to discuss China's currency valuation on his upcoming trip to the country. The Chinese yuan is kept artificially cheap and has damaged US manufacturing as producers are priced out by cheaper Chinese manufacturing.

Elsewhere, the Swiss franc dropped to two-week lows against the euro and dollar on Monday on speculation the Swiss National Bank could further act to curb strength in the currency by setting an exchange-rate target as early as this week. The South African rand strengthened against the US dollar for a fourth day as commodity prices rose on optimism the global recovery is intact, supporting demand for higher-yielding assets.

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.