Friday, 21 January 2011

Pound falls further vs stronger Euro

21st January 2011
Good morning. Sterling is down further this morning against the Euro and US Dollar. It's a combination of weakness in the Pound, coupled with renewed confidence in the EU and US markets. We'll look at this in a moment after the usual snapshot of rates as at 08:30am:

  • GBP/EUR 1.1750
  • GBP/USD 1.5921
  • GBP/AUD 1.6115
  • GBP/NZD 2.1049
  • GBP/CAD 1.5880
  • GBP/CHF 1.5302
  • GBP/ZAR 11.236
  • GBP/JPY 131.70
  • GBP/HUF 323.30
  • GBP/NOK 9.307
  • EUR/USD 1.3547

Sterling down vs Euro

UK Factory orders fell according to figures released yesterday. This was worse than expected and so Sterling fell as a result.

Also pushing GBP/EUR rates lower was a much stronger Euro. The euro has risen sharply, despite signs that governments are in no rush to increase the eurozone rescue fund.

Traders cited decent buying in the euro/sterling pair by an UK clearer on behalf of a real money account. "It was partly a dollar move, but there was a sell-off in sterling also which drove it lower," said Michael Hewson, markets analyst at CMC said. "We had seen nine successive days of gains in cable and positions were looking overstretched. It is a healthy correction but I don't think it can fall past $1.58 in the short term,"

The pound has been well supported since High inflation data on Tuesday caused investors to bring forward expectations for when the BoE will hike rates. However, they say that a weak economy and harsh austerity measures to come mean a rate hike is not a done deal. This uncertainty on interest rates is pushing Sterling lower as it's likely a rate rise will not happen for many months.

Stronger Euro pushing GBP/EUR rates down

The Euro has regained strength against the Pound and the US Dollar, and exchange rates to buy Euros have fallen as a result. Traders cited an improvement in risk appetite, growing expectations that euro zone policymakers will arrive at a more durable solution to the debt crisis and a hawkish central bank as reasons behind the latest surge in the euro.

The euro rose to a two-month high against the U.S. dollar this morning, and rates to buy Euros with Sterling are now in the €1.17's.

Today's Data

This morning we have UK Retail Sales, which may have taken a hit due to the weather conditions last month. There is also a measure of Public Sector borrowing from the UK today. Generally speaking, if net bowing is negative then this will be positive for Sterling.

Have a great weekend.

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