Friday, 11 March 2011

Pound down vs Euro, Japan quake shocks markets

11th March 2011
Good morning. The pound is down vs the Euro this morning after rates were left on hold in the UK. The earthquake in Japan has also shocked the market and the Yen has weakened significantly. At 08:30am this morning rates are as follows:


  • GBP/EUR 1.1599
  • GBP/USD 1.6042
  • GBP/AUD 1.6021
  • GBP/NZD 2.1819
  • GBP/CAD 1.5623
  • GBP/CHF 1.4979
  • GBP/ZAR 11.061
  • GBP/JPY 132.70
  • GBP/HUF 316.91
  • GBP/NOK 9.0650
  • EUR/USD 1.3829

Sterling down as interest rates left on hold

The Bank of England left interest rates on hold at the record low of 0.5%. It's now 2 years since rates have moved. Despite inflation running at double the target rate, the BoE have decided not to push rates up as yet to combat this.

This illustrates the fragile position of the UK in that rates have to stay low to help the recovery, while inflation figures need rates to go up. This fragility is reflected in the fact the pound fell after the decision, and rates vs the Euro and US Dollar are now lower. We'll have to wait 2 weeks to see how the MPC members voted and how many thought rates should go up.

Japan earthquake shocks markets

Asia stock markets and the yen have fallen sharply in response to a tsunami and earthquake in Japan measuring 8.9 on the Richter scale. It struck minutes before the 0645 GMT close of trading in Tokyo.

The dollar briefly gained about 0.5% against the yen to 83.275 yen, before dropping back again. The Yen is usually a safe haven currency, and now investors will drop this for the US Dollar. As a result we've seen GBP/USD rates drop as the US currency gains strength due to this.

Today's Data

We end the week with various measures of inflation from the UK. Recently talk of a rate hike in the UK has been overshadowed by the fact it’s likely to happen in the EU sooner, but never the less high figures today could cause the pound to gain. Low figures could send it lower though, so get in touch to discuss the options available to protect against adverse rate movements.

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