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Sterling has volatile week

Published:  08 June, 2012

Sterling had a fairly mixed week with significant and rapid movements during the course of a day.

Currency rate-  June 2012

Currency Rates

EURO/GBP 1.2367 - (EURO/GBP 1.2432)
US$/GBP 1.5449 - (US$/GBP 1.5374)
CHF/GBP 1.4857 - (CHF/GBP 1.4946)
CAN$/GBP 1.5939 - (CAN$/GBP 1.5905)
AUS$/GBP 1.5679 - (AUS$/GBP 1.5855)
ZAR/GBP 12.9965 - (ZAR/GBP 13.0925)
JPY/GBP 122.45 - (JPY/GBP 120.60)
HKD/GBP 11.9841 - (HKD/GBP 11.9291)
NZD/GBP 2.0236 - (NZD/GBP 2.0437)
SEK/GBP 11.104 - (SEK/GBP 11.193)
AED/GBP 5.6710 - (AED/GBP 5.6612)
US$/EURO 1.2486 - (US$/EURO 1.2356)
INR/GBP 85.61 - (INR/GBP 85.86)

The Bank of England decided to keep the base interest rate and the asset purchase facility on hold despite the call from the International Monetary Fund (IMF) for more monetary easing. Investors will wait to see how the MPC members voted when the meeting minutes are released on June 20. Market speculation is that the decision will have been close on further asset purchase being undertaken. Other data released this week included the Construction Purchasing Managers' Index (PMI) which came in as expected and Services PMI figures which were better than expectations.

The Euro recovered from its two year low against the US dollar this week; but, struggled against the commodity backed currencies. The main news this week was the ECB's announcement it would keep rates on hold at 1.00% as was widely expected; however, the President of the ECB said that the prospect of cutting interest rates had been discussed at the central bank meeting. A relatively solid bond auction in Spain and France boosted confidence in the region yesterday.

The US dollar was fairly strong in the early part of the week, before weakening off as risk appetite returned to the market. It was fairly quiet week on the data front in the US with no significant surprises in the Beige Book; whilst, non-manufacturing PMI and unemployment figures came in as expected. The President of the Federal Bank did state however, that he sees considerable risk to the US economy from the problems that Europe is currently facing.

Elsewhere, the main news this week was the shock announcement that the People's Bank of China cut interest rates for the first time since 2008 by 0.25%. Furthermore, the Reserve Bank of Australia cut interest rates from 3.75% to 3.5% whilst the Bank of Canada kept rates on hold. Positive data from Australia produced quarterly GDP growth figures of 1.3% when only 0.5% was expected and better than expected employment figures. The Australian dollar has strengthened across the board. Japanese current account figures were released late last night; whilst, first thing this morning trade balance figures from Australia were released and the governor of the Reserve Bank of Australia was also speaking.

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