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Currency update June 25: Sterling extends gains

Published:  25 June, 2010

Currency update June 25: pound at a five month high against a basket of major currencies.

Currency rates: June 25 AM
EURO/GBP - 1.210
US$/GBP - 1.492
CHF/GBP - 1.643
CAN$/GBP - 1.554
AUS$/GBP - 1.726
ZAR/GBP - 11.392
JPY/GBP - 133.91
HKD/GBP - 11.612
NZD/GBP - 2.118
HUF/GBP - 346.80

Sterling extended gains yesterday and hit the highest level since November 2008 against the euro after renewed sovereign debt fears in Greece contrasted sharply with a new found optimism that the UK budget cuts will rein in the country's record deficit.

Following the new government's emergency Budget, investors are now confident that the UK is well on the way to being on a stable financial footing again.

One of the big drivers yesterday was investors buying back sterling after placing extreme bets that the pound would fall. This extra demand has seen the pound at a five month high against a basket of major currencies, after peaking yesterday at 1.2222/£1 and $1.5011/ £1.

We have the G8 meetings going on today, and any positive rhetoric will continue to have a strong effect on the pound. Get in touch now for a live price.

In the Euro zone, yesterday saw Greek debt take centre stage again after the cost of insuring against Greek government default jumped to record levels. The market in this type of insurance gives investors a very clear picture of the sentiment towards the region, and the record cost meant that the euro fell yesterday with one analyst at French bank Societe Generale expecting the pound to hit 1.25/ £1 soon.

Data out today in the Euro zone is expected to show that German import prices have increased by 2% in May - up 9.5% on last year. France's GDP growth is expected to remain unchanged at 0.1% for the quarter. Call in now for a live exchange rate.

In the USA, the final estimate of GDP for the first Quarter is expected to be uneventful with growth forecast to remain unchanged at 3% year on year. This ends a relatively disappointing week for the US economy - particularly from housing data.

On the other hand, jobless claims fell unexpectedly by 19,000 which came as a welcome surprise. Next week's June employment report will give a clearer picture of the Labour market in the USA. We are looking at particularly good sterling strength against the US dollar - get in touch now to avoid losing out.

Elsewhere, the Australian and New Zealand dollars fell around 0.6% against the US dollar as Asian stocks fell in overnight trade and impacted on risk appetite for the higher yielding 'riskier' currencies.

New Zealand's trade balance surplus widened to a record high of NZ$4.2bn, however the outlook looks poor as Chinese demand is set to lag over the coming months.

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