Pound drops to 6 week low vs Euro, before recovering this morning.

7th September 2010
Good morning. Sterling fell to a 6 week low versus the euro yesterday, hit by market talk of heavy selling by a UK clearing bank and concerns over Britain’s fragile economic recovery. The GBP/EUR rate got as low as €1.1920, however has staged a recovery this morning, and rates are already back into the mid €1.20’s. We’ll look at this in a moment after the usual snapshot of rates as at 08;30am:

  • GBP/EUR 1.2044
  • GBP/USD 1.5408
  • GBP/CAD 1.6004
  • GBP/CHF 1.5566
  • GBP/AUD 1.6886
  • GBP/NZD 2.1388
  • GBP/HKD 11.968
  • GBP/NOK 9.4917
  • GBP/JPY 129.06
  • EUR/USD 1.2791

Pound falls to 6 week low against Euro

A large UK clearer yesterday bought around €1 billion with Sterling, which severely weakened the pound throughout trading yesterday. A string of soft data releases last week reignited concerns over the fragility of Britain’s economic recovery, prompting expectations of pressure on sterling against most of its major crosses.

Data on Friday showed British service sector activity grew at its slowest pace since April 2009, with a marked fall in hiring as employers worried about an economic slowdown and public spending cuts. The poor news also went some way to pushing Sterling down yesterday.

Pound stages recovery overnight

At around midnight last night, the BRC Retail Sales, which measures changes in the actual value of retail sales from participating companies, came in at 1%, which was double the estimate. As currency markets move 24/7 the pound started to recover throughout the night. This shows how quickly trends can be reversed in the light of better economic data.

When markets opened at 8am this morning, the pound surged higher and has now recovered back to the mid €1.20’s against the Euro.

Australian Interest Rates

Rates were left on hold early this morning as expected. Markets expect Australia to start raising their interest rates before the UK, and when they do we expect the GBP/AUD rate to drop further.

Today’s Data

Factory orders from Germany could cause some volatility for GBP/EUR. There’s also some shop price data for the UK later today.

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