Friday 6th January 2011
Good morning. Sterling has surged against the Euro, and risen to its highest in nearly 16 months. This was due to a weak Euro, over worries about EU sovereign funding pressures and after data showed a pick-up in UK service sector activity. At 08:30am this morning rates are as follows:
• GBP/EUR 1.2123
• GBP/USD 1.5609
• GBP/AUD 1.5127
• GBP/CHF 1.4770
• GBP/CAD 1.5796
• GBP/ZAR 12.642
• GBP/JPY 119.69
• GBP/DKK 9.0151
• GBP/NOK 9.3128
Pound at 16 month high vs the Euro
Sterling rose against the weak Euro yesterday, breaking through the €1.21 level and creating the best buying opportunities for 16 months. The euro was down broadly and not just against the Pound. It hit lows versus the dollar and a decade low versus the yen as major concerns about euro zone countries' ability to raise funds in coming months pushed investors away from the common currency.
France's first bond auction of the year also happened, where investors mindful of the threat to the country's AAA rating demanded higher returns than they had for the same maturities in December. Italian and Spanish debt sales next week were seen as further key tests of investor sentiment as both countries grapple with huge budget deficits.
If you need to buy Euros, now is a good time to consider a Stop Loss order, whereby you can set a lower level below the current rate, and if the exchange rate falls below this, your currency will be purchased, protecting you against adverse rate movements.
Sterling outperforming the Euro
If UK economic data continues to show improvement, this will dampen expectations for further quantitative easing by the Bank of England, also helping the pound. Economists polled by Reuters still expect the BoE to expand its asset purchasing programme though by less than they forecast in a poll in December.
"The manufacturing, services and construction PMIs have all surprised on the upside and offer some hope that there is still life in the UK economy," said James Knightley, economist at ING.
We end the week focused on EU data: Consumer Confidence, Economic Confidence, Retail Sales and German Factory Orders. We end in the USA with unemployment figures and Non-Farm Payrolls.
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