Currency Rates

EURO/GBP - 1.136
US$/GBP - 1.633
CHF/GBP - 1.676
CAN$/GBP - 1.678
AUS$/GBP - 1.767
ZAR/GBP - 12.093
JPY/GBP - 148.57
HKD/GBP - 12.678


Comments: Last week here in the United Kingdom we saw positive manufacturing forecasts, an optimistic outlook on the UK’s growth, talk of a reduction in the emergency funding and even mention of the recession being behind us – all of which helped to improve on the negative outlook for sterling. As a result, sterling had a “good week” against most currencies including the euro and US dollar. But sterling is moving in a fairly narrow range and still liable to move in the other direction with a slight shift in sentiment. This week we have a raft of economic data out staring with Decembers inflation figures which is expected to show an increase on the back of higher oil prices. Later in the week we have labour market data, public finances data and retail sales figures which are all expected to be “positive”. So we wait to see if sterling can build on last weeks momentum.

The euro is sitting at €1.133/£1 inter bank. Sterling’s strength was compounded by the European Central Bank which kept interest rates on hold last week and dampened the market’s expectation of a rise in rates anytime soon. The major focus was on Greece. Whilst prime minister George Papandreou struggled to convince investors that he can control the budget, ECB president Jean-Claude Trichet made it clear that Greece would receive no ‘special treatment’ from the EU in the form of bailout funding. Inflation figures out on Friday showed price rises of around 0.9%, which is still below the ECB’s target of 2%. Hence their decision to keep interest rates on hold. This week we have the release of the euro zone’s purchasing managers indices for both the manufacturing and services sector. The expectation is for a slight increase confirming the steady improvement in economic conditions in the euro zone.

The US$ is sitting at US$1.631/£1 inter bank. In the United States, retail sales in December came in worse than expected. Against an expectation of a positive increase, we saw a decrease of 0.3%. The major news last Friday was US inflation figures rising by 0.1% in December to 1.9% as increased energy prices filtered through. The major news out of the US this week will be producer price index for December and the weekly initial jobless claims figures.

Commodity backed currencies suffered slightly at the start of last week as the Chinese increased the amount that their banks must keep as reserves. This led to a fear of a knock on affect resulting in reduced buying of commodities. This fear soon dissipated. We also saw the employment figures in Australia coming in better than expected which boosted the Australian dollar. So the commodity backed currencies continue to be the flavour of the year but this is on the back of the huge amounts being pumped into the Chinese economy by their government.

Note: All rates are mid market inter bank and indicative at the point of publication.