Friday, 1 April 2011

Sterling hits new 5 month low vs Euro

1st April 2011
Good morning. Sterling fell to a fresh 5 month low vs the Euro yesterday after the single currency was boosted by expectations that interest rates in Europe will rise faster than in the UK, and talk of month-end demand from central banks. At 08:30am this morning rates are as follows:
  • GBP/EUR 1.1346
  • GBP/USD 1.6070
  • GBP/AUD 1.5530
  • GBP/NZD 2.1104
  • GBP/CAD 1.5557
  • GBP/CHF 1.4793
  • GBP/ZAR 10.849
  • GBP/JPY 134.34
  • GBP/HUF 300.98
  • GBP/NOK 8.8758
  • EUR/USD 1.4161

Interest Rate speculation continues to drive markets

It is speculation that the EU will raise interest rates before the UK that is driving exchange rates at the moment. Paul Robson, currency strategist at RBS Global Banking said yesterday that "Further gains look likely while the market embraces the more positive aspects of the euro area periphery story, ECB tightening and softening UK data,".

It is this view that is giving the Euro such strength at the moment, and this is despite news yesterday that Irish banks will need a further injection of funds. Usually this would weaken the Euro but markets brushed this off and instead focused on the expected rate rise in the EU.

A speech from Bank of England policymaker David Miles did little to move the pound as he largely steered clear of monetary policy issues, although he said the BoE would need to recalibrate the link between its interest rate and mortgage rates.

Today's Data

We have Halifax house prices from the UK in addition to some inflation data. The EU also has lots of inflation data today in addition to unemployment. There are also some unemployment figures from the USA today.

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