Currency update June 29: Sterling climbs to new heights

Published: 29 June, 2010

Currency update June 29: Sterling had a strong day yesterday, climbing to a one and a half year high against the euro and a seven week high against the US dollar.

Currency rates: June 29 AM

EURO/GBP - 1.231
US$/GBP - 1.505
CHF/GBP - 1.636
CAN$/GBP - 1.571
AUS$/GBP - 1.750
ZAR/GBP - 11.484
JPY/GBP - 133.39
HKD/GBP - 11.715
NZD/GBP - 2.153
HUF/GBP - 353.51

The pound jumped to €1.2250/ £1 and $1.5104/ £1 as the UK currency continued to benefit from last week's tight emergency Budget.

Investors speculated that the Euro zone debt problems would leave the region much weaker than the UK after the new coalition's tight Budget was received well by the financial markets. Many analysts see this as the Budget that whips the economy into shape. However, gains against the US dollar have been muted, as many analysts feel that last week's post-Budget gains went too far.

Another boost for the pound came as everyone's favourite Bank of England member Andrew Sentence stated that the latest Budget would not remove the need for interest rate hikes in the coming months.

Out later today, there is monthly lending data and also data on mortgage approvals. Even though the markets have been moving up, there is nothing to stop the pound dropping - call in now to ensure that you secure the best rate.

In the Euro zone, monthly inflation data for Germany came in as expected but money supply data showed that the amount of money in the European economy had shrunk by 0.2%. There is little data out today aside from a European commission report on confidence in the region which is expected to show relatively stable readings.

Sentiment towards the Euro zone has seen a relative drop compared to the UK as the emergency budget was released - call in now, especially if you have euros to move into sterling as we could see €1.25/ £1 a lot sooner than many would like.

In the USA, inflation data for consumer purchases came in slightly better than expected at 0.2% but data on personal income showed a drop of 0.1% on the month.

Elsewhere, Japan's unemployment rate unexpectedly rose in May as the economy shed 240,000 jobs. These figures show how much the Japanese economy relies on overseas trade to drive domestic demand, especially given how China currently has to curb the excessive growth of its economy.

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