Thursday 15th September 2011
Good morning. Sterling fell again yesterday against both the Euro and US Dollar, on concerns over the impact of the euro zone's debt crisis on UK economic growth and British. This could force the Bank of England into more Quantitative Easing, and it's this that has pushed the Pound down. At 08:30am this morning rates are as follows:
• GBP/EUR 1.1458
• GBP/USD 1.5750
• GBP/AUD 1.5396
• GBP/NZD 1.9312
• GBP/CHF 1.3808
• GBP/CAD 1.5626
• GBP/ZAR 11.682
• GBP/JPY 120.76
• GBP/DKK 8.5314
• GBP/NOK 8.9444
• EUR/USD 1.3743
Sterling falls to fresh 8 month lows vs US Dollar
Continuing worries over the euro zone's debt problems kept investors wary of riskier currencies such as the Pound, and the Dollar has benefited as it's perceived as a safe haven currency. This has caused significant strength for the USD, and as a result rates have dropped to an 8 month low in the $1.57's. With the Swiss Franc no longer as attractive as it was due to the SNB intervention, while there is continued turmoil we expect continued strength for the Dollar.
UK exposure to Eurozone pushes GBP/EUR lower
The EU debt crisis is placing its banking sector under severe strain. Rating agency Moody's cut the credit ratings of France's Credit Agricole SA and Societe Generale yesterday. This affects the UK because of our banks exposure to euro zone banks. While you would assume the bad news for the EU would weaken the Euro, as we are so closely tied to them it has also pulled the Pound down vs the Euro.
"The UK banking sector is exposed to the euro zone crisis, particularly to Portugal, Italy, Ireland, Greece and Spain," said Chris Turner, head of fx strategy at ING.
UK economic figures continue to disappoint
We continue to see poor data from the UK, with unemployment data yesterday showing it's biggest rise in 2 years. Sterling's recent losses have been compounded by a run of poor economic data, which many analysts believe could force the BoE into pumping more money and stimulate growth. More QE would weaken the Pound further, and next Wednesday we will see the Bank of England minutes to see if this option was discussed. It's this fear of further QE that is likely to push the Pound lower in the coming weeks.
From the US today we have further inflationary numbers, and Industrial Production figures. Other than that all data today is from Switzerland; an interest rate decision, Industrial Production figures, and inflation data. Given the effect the Swiss had on the markets last week, we will be keeping a close eye on these numbers.
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