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Sterling fairly strong yesterday despite poor start

Published:  25 July, 2012

Sterling was fairly strong yesterday despite a poor start to the day as new mortgage approval rates were much lower than anticipated.

Sterling was fairly strong yesterday despite a poor start to the day as new mortgage approval rates were much lower than anticipated.

Currency Rates

EURO/GBP - 1.2818
US$/GBP - 1.5503
CHF/GBP - 1.5434
CAN$/GBP - 1.5822
AUS$/GBP - 1.5162
ZAR/GBP - 13.2210
JPY/GBP - 121.06
HKD/GBP - 12.0177
NZD/GBP - 1.9804
SEK/GBP - 10.8181
AED/GBP - 5.6906
US$/EURO - 1.2056
INR/GBP - 87.38

The main data released today will be the preliminary GDP figures which are expected to show the market contracted by 0.2% extending the "double-dip" recession that we are currently experiencing.

The euro was relatively weak yesterday dropping below the 1.2050 mark against the US dollar as fears surrounding Greece and Spain dominated the headlines. Services and manufacturing Purchasing Managers' Index figures released across Europe yesterday were much worse than expected showing that the Eurozone's economy continues to contract. Spanish bond auctions continued to rise to 7.636% as some economists predict that Spain may need a full international government bailout within the next three weeks as Catalonia's regional government looks set to follow Valencia in applying for aid from the Spanish government. More worries came as the Greek Prime Minister suggested that the country's recession is even deeper than first thought and now expects a contraction of 7% this year which is significantly worse than the 5% contraction the Bank of Greece had predicted. Greece must now convince its creditors that it has done enough to deserve its next tranche of fund of €31.5 billion; furthermore, EU officials warned that Greece may need yet another bailout. German business climate sentiment figures are announced today; but, the markets will be fixated on any developments in Greece or Spain.

The US dollar performed well yesterday as investors continued their flight to safety in such uncertain times. On the data front, manufacturing PMI data was slightly worse than expected whilst the Richmond Manufacturing Index was much worse than anticipated underlining the headwinds the world's largest economy is currently facing. Out today, figures demonstrating the number of new homes sold in the previous month will be announced.

Elsewhere, the Japanese yen continued to strengthen due to its safe haven status whilst the Hungarian forint and South African rand were particularly weak. Canadian core retail sales beat expectations yesterday; whilst, Chinese manufacturing PMI was marginally better than expected providing some slight relief to the markets. Trade balance data from New Zealand and Japan released overnight beat expectations; but, Australian Consumer Price Index (CPI) figures were slightly lower than anticipated.