Sterling falls to 8 month low vs currency basket

Friday 24th June 2011
Good morning. Sterling has fallen to a 3 month low vs the US Dollar, and an 8 month low vs a basket of currencies, due to the fact the Bank of England may pursue more Quantitative Easing. At 08:30am this morning rates are as follows:

  • GBP/EUR 1.1235
  • GBP/USD 1.5958
  • GBP/AUD 1.5182
  • GBP/NZD 1.9653
  • GBP/CAD 1.5648
  • GBP/CHF 1.3380
  • GBP/ZAR 10.958
  • GBP/JPY 128.55
  • GBP/DKK 8.3792
  • GBP/NOK 8.7508
  • EUR/USD 1.4203

Sterling continues to fall on QE fears

A darker economic outlook from the BoE as outlined in this weeks MPC minutes prompted a sell-off in the pound. This is on speculation that ongoing economic weakness would keep the BoE from raising rates until well into 2012. Sterling also came under pressure as investors cut exposure to riskier assets after Federal Reserve Chairman Ben Bernanke cut the Fed’s U.S. growth forecast and on persistent uncertainty about Greece’s debt crisis.

“Risk-off sentiment and the increased possibility of more QE in the UK is encouraging sterling lower against the dollar,” said Jeremy Stretch, currency strategist at CIBC

Despite Sterling weakness GBP/EUR rates rise

Sterling gained against the euro, however, as the single currency suffered broadly due to concerns about how the Greek debt crisis could be resolved . The GBP/EUR rate gained by around 0.8%, however most of this recovery has already been wiped out this morning.

What do the analysts say?

Analysts said sterling has more room to fall as short-term markets are not pricing in a BoE rate rise until July or August 2012 . Only a few months ago markets had been pricing in around two rate rises by the end of this year.

Societe Generale currency strategist Peter Frank said the pound would be hyper-sensitive to any signs of more weakness in the economy, and that more dismal economic figures could push it down to around $1.5350 against the US Dollar, and as low as €1.08 against the Euro.

Today’s Data

There is no UK data of note today. The main data are EU Retail sales and German confidence measures. From the US we have release regards GDP and durable goods orders , both of which could cause volatility for both GBP/USD and GBP/EUR.

On Monday morning, we’ll have a detailed outlook of both Pound vs Euro, Pound vs US Dollar, and the prospects for Sterling for the coming months. Enjoy your weekend.

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