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Sterling falls after UK figures show economy contracted by 0.2%

Published:  26 January, 2012

Sterling fell against the US dollar yesterday, coming under pressure after figures showed that the UK economy contracted by 0.2% against an expected drop of 0.1%.

Currency Rates - January 26

EURO/GBP - 1.1951

US$/GBP - 1.5641

CHF/GBP - 1.4431

CAN$/GBP - 1.5691
AUS$/GBP - 1.4722
ZAR/GBP - 12.384
JPY/GBP - 121.56
HKD/GBP - 12.156

NZD/GBP - 1.9088

SEK/GBP - 10.5642

AED/GBP - 5.7532

US$/EURO - 1.3104

INR/GBP - 78.17

There were market concerns that the Bank of England would look to ease monetary policy further. Minutes from the Bank's last meeting showed that further asset purchases were "likely", which essentially means definitely. Sterling made some gains against the euro as investors became concerned that the ECB would have to write down holdings of Greek debt.

The euro regained ground against the US dollar after the Federal Reserve pledged to maintain a 'highly accommodative' stance to monetary policy over the next two years. Whilst Germany released some positive economic data yesterday, there is still concern that there has been no formalised agreement on the euro zone crisis.

In the USA, yesterday saw the announcement by the FOMC - or US equivalent of the Monetary Policy Committee. It pledged to keep interest rates at between 0 -0.25% until at least mid-2013. In addition, figures showed that output at US factories rose by 0.9% last month - the highest gain since December 2010 - further delivering on the recent positive run of US economic data.

Elsewhere, the Japanese yen fell off yesterday after figures showed that the country had lodged the first trade deficit since 1980. This prompted many investors to unwind holdings in the Japanese currency - traditionally a haven for global investors, backed by the long term trade surplus.

Supplied by Nick Ryder of Smart Currency Exchange, the currency partner to Harpers Wine and Spirit who have teamed up with Smart to provide readers with a free bespoke currency service. Go to for more information or call on 0207 898 0500.