Sterling hit a 3 week high against the US dollar yesterday; gaining nearly 2 cents from earlier lows after concerns hit the US economy that left investors selling the US dollar. At the start of the day, sterling dropped after a weak housing survey and downbeat comments by Deputy Governor of the Bank of England Charles Bean. Figures from housing website Rightmove showed that asking prices for houses had fallen by 3.0% in the last month. Lower mortgage approval rates and economic uncertainty were cited as the major factors. Deputy Governor Bean stated that the Bank of England would still look to use additional Quantitative Easing if UK growth slowed or if the Euro zone debt crisis had an adverse effect on the UK economy. Key data released today is UK consumer price inflation. This is the major indicator being used to assess whether further QE is needed. As such, there is likely to be some volatility, so call in for a live exchange rate and to discuss your options.
In the Euro zone, the euro received a welcome boost as strong demand from Eastern Europe and Latin American countries helped the single currency post 1.5% gains against its US counterpart. Ahead of a key Federal Reserve meeting today and a meeting of European ministers later in the week, buying volumes were much lower, which can see the market move a lot more than normal. Debt in the region is still a huge concern, with the expectation that Portugal and Spain will soon follow Ireland and Greece down the path of a bailout. Out today there is key German consumer sentiment data that is likely to be at odds with the general assessment of the region as a whole. Call in now for a live exchange rate.
In the USA, the US dollar fell broadly as credit rating agency Moody’s stated that last week’s extension of Bush-era tax breaks could push the US budget deficit to levels that would see the agency rethink their outlook on the USA’s AAA credit rating. The impact of the extension of the tax breaks was positive with growth expectations being revised upwards and stock markets performing well. However, this would essentially be driven by government debt – hence the concern. This is likely to develop further, so speak to one of the team now about buying at the right time. Later today, there is the first meeting of the Federal Reserve since adding $600bn to the US economy.
Elsewhere, despite inflation of above 5%, China is expected to raise interest rates only twice in 2011 according to a poll by Reuters with a 25 basis point rise by the end of 2010. The language used in Sunday’s policy statement was interpreted by many that the Chinese government feels it has inflation under control currently.
EURO/GBP – 1.1798
US$/GBP – 1.5883
CHF/GBP – 1.5334
CAN$/GBP – 1.5975
AUS$/GBP – 1.5922
ZAR/GBP – 10.8225
JPY/GBP – 130.22
HKD/GBP – 12.35
NZD/GBP – 2.1058
SEK/GBP – 10.7977
US$/EURO – 1.3459
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