3rd June 2011
Good morning. Sterling continued to fall against the Euro yesterday, and now sits at a 4 week low. The pound was hurt by dovish comments from a UK policymaker which added weight to the view domestic interest rates will stay on hold for some time. At 08:30am this morning rates are as follows:
- GBP/EUR 1.1290
- GBP/USD 1.6342
- GBP/AUD 1.5330
- GBP/NZD 2.0087
- GBP/CAD 1.5980
- GBP/CHF 1.3765
- GBP/ZAR 10.929
- GBP/JPY 131.76
- GBP/DKK 8.4140
- GBP/NOK 8.7849
- EUR/USD 1.4468
Sterling falls to 4 week low vs Euro
The pound steadily fell against the Euro yesterday, much of which was due to Wednesday’s PMI survey revealing the slowest manufacturing growth since September last year.
Focus now turns to PMI data from the services’ sector – which makes up around 70 percent of the UK economy – to gauge the resilience of economic growth.
What do the analysts say?
“We are continuing to see soft numbers and soft comments, people are getting more nervous about the UK growth story,” said Daragh Maher, deputy head of global FX research at Credit Agricole.
“The market is expecting the PMI reading to be pretty flat but if we can hit 54.3 or 54.2 there will be some relief and we’ll probably see a bit of a bid for sterling.”
Interest Rates continue to have their effect
A string of poor data has added to the market view the BoE will hold rates at 0.5 percent until at least the end of 2011. This was reinforced by Bank of England policymaker Paul Fisher who said in a newspaper interview he would consider voting for another round of quantitative easing if the economy worsened. That is in sharp contrast to the European Central Bank which is likely to flag another rate hike in July to tame inflation risks.
UK data today is Purchasing manager Index, and the EU also has the same release. It’s an overall indicator of economic health for both zones. The US has a raft of employment figures, including Non Farm Payrolls that often causes big volatility in GBP/USD, as it’s notoriously difficult to forecast.
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