Sterling down against EUR & USD

Tuesday 28th June 2011
Good morning. Sterling has dropped to a 5 month low vs the US Dollar, after the US currency strengthened on it’s safe haven status, following renewed concerns over the EU debt crisis. Sterling is also likely to remain under pressure in the coming weeks as the BoE consider further Quantitative Easing. At 08:30am this morning rates are as follows:

  • GBP/EUR 1.1172
  • GBP/USD 1.5976
  • GBP/AUD 1.5254
  • GBP/NZD 1.9802
  • GBP/CAD 1.5744
  • GBP/CHF 1.3328
  • GBP/ZAR 10.944
  • GBP/JPY 129.10
  • GBP/DKK 8.3310
  • GBP/NOK 8.7510
  • EUR/USD 1.4303

Pound down against Euro and US Dollar

As stated above, the US Dollar has strengthened on it’s safe haven status, pushing rates to a 5 month low. Against the euro, sterling also lost ground with the common currency lifted by a bout of short-covering and signs of progress on a scheme to make private bondholders share the burden of any Greek debt solution.

Despite this, euro zone peripheral bond yield spreads widened and kept investors edgy ahead of Tuesday’s Greek parliamentary vote on new austerity measures that are a pre-condition for new bailout funds.

Sterling weak due to interest rates and possible Quantitative Easing

Investors have steadily pared back expectations of a rate hike by the Bank of England due to a run of dismal economic data. The BoE’s dovish stance, outlined in policy meeting minutes published last week, contrasts with the position of the European Central Bank, which is thought likely to hike in July.

Money markets are not pricing in a BoE rate rise until July or August 2012, a marked change from the start of the year when they were pricing in at least three quarter-percentage-point rate hikes by end-2011.

Today’s Data

Gross Domestic Product is the main UK release today, which is a broad measure of economic activity. From the Eurozone we have the Consumer Price Index from Germany. This is an inflationary measure and if high could increase the chance of an EU rate hike, pushing GBP/EUR lower. Consumer Confidence from the USA is the major release from across the pond.

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