Sterling drops vs USD, up against EUR

13th August 2010

Good morning. Yesterday Sterling fell from a 6 week high against the Euro, and hit a 2 week low against the US Dollar as recent gains were short lived. Today we’ll take a look at each currency in turn. First as usual a snapshot of exchange rates as at 08:30am:

  • GBP/EUR 1.2157
  • GBP/USD 1.5664
  • GBP/AUD 1.7353
  • GBP/NZD 2.1907
  • GBP/CAD 1.6225
  • GBP/CHF 1.6433
  • GBP/ZAR 11.296
  • GBP/JPY 134.58
  • GBP/NOK 9.6057
  • EUR/USD 1.2881

Pound vs Euro

Earlier this week we had a big dip against the Euro after the news from the Bank of England. In the past few days however Sterling has surged against the Euro, hitting 6 week highs at close to €1.22. This was despite the gloomy Bank of England report on Wednesday.

The reason for the gains were more to do with Euro weakness,as weak economic data from Greece increased concerns about euro zone peripheral countries. The weak EU data has weakened the single currency meaning that despite poor UK data, the exchange rate gained.

On Wednesday, sterling fell versus the dollar after the BoE cut its forecast for UK growth and left the door open to more quantitative easing, at the same time predicting inflation would fall well below target in two years’ time. The bad news from the BoE will likely weigh on the pound in the coming weeks, and the recent gains against the Euro could be short lived as investors worries move from the weak Euro to uncertainty over Sterling.

Pound vs US Dollar

Sterling hit a near two-week low against a broadly firmer dollar yesterday after an early rally petered out as concerns about the global economy prompted investors to pull back from riskier assets.

The dollar extended gains after an unexpected rise in weekly U.S. jobless claims, which rose to its highest level in close to six months, underscoring a weak job market.

Today’s Data

From the EU Gross Domestic Product features from Germany will be closely watched as Germany is the biggest economy in the EU. We also have GDP data from the EU as a whole, and so we expect volatility today for GBP/EUR rates depending on the results. From the US, watch for Retail Sales and inflation data that may cause GBP/USD rates to be volatile.

On Monday, we’ll have a full breakdown of the data next week that will probably have an impact on exchange rates.

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