Pound remains stable, but analysts warn of drop

Tuesday 23rd August 2011

Good morning. With no data of note being released yesterday, Sterling remained steady against both the Euro and US Dollar, however analysts are still warning that upcoming data for the UK may highlight the fragility of the UK economy and push the Pound back down. At 08:30am this morning rates are as follows:

GBP/EUR 1.1435

GBP/USD 1.6504

GBP/AUD 1.5731

GBP/NZD 1.9817

GBP/CHF 1.3006

GBP/CAD 1.6274

GBP/ZAR 11.804

GBP/JPY 126.54

GBP/DKK 8.5162

GBP/NOK 8.9426

• EUR/USD 1.4429

Sterling remains stable vs other currencies

As there were no scheduled releases yesterday there was little movement on the currency markets. With no surprise announcements the Pound remained stable against other currencies. As investors are still seeking refuge from turbulence in the markets caused by the EU debt crisis, Sterling remained supported above €1.14 against the Euro.

Analysts warn Sterling could fall

The pound remains strong at the moment because the UK has its own independent currency and the government is perceived to be doing something fiscally austere. It’s a haven while there is global asset market turmoil and a lack of solution to the European debt situation. So it’s only really these facts that are keeping Sterling supported.

Analysts said the pound’s scope for gains may be limited given wariness that upcoming data may highlight the fragility of the UK economy. Despite sterling’s recent strong gains, some analysts warned UK economic fundamentals remained shaky.

Recent data suggests the UK economy is stagnating, although it is holding up better than the United States where a poor factory activity gauge last week prompted some to warn the economy risked slipping into another recession. Later in the week attention will focus on the second estimate of second quarter GDP due on Friday, which is expected to confirm the economy grew by a lacklustre 0.2 percent.

Today’s Data that might affect rates

UK Mortgage Approvals are released today, showing the health of the UK housing market. From the Eurozone we have Inflation Data from Germany, and also Economic Sentiment Surveys from Germany and the EU. Also from the EU, we have measures of consumer confidence that may affect the value of the Euro. In the USA, Home Sales figures are released. Trade Balance figures and Inflation data are released from New Zealand.

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