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Currency update, July 8: sterling's two month high against the dollar

Published:  08 July, 2010

Currency analysis from Smart Currency Exchange, July 8: good day for sterling

Currency Rates, July 8
EURO/GBP - 1.199
US$/GBP - 1.517
CHF/GBP - 1.600
CAN$/GBP - 1.587
AUS$/GBP - 1.736
ZAR/GBP - 11.530
JPY/GBP - 133.80
HKD/GBP - 11.821
NZD/GBP - 2.146
HUF/GBP - 338.20

Sterling had a good day yesterday, recovering lost ground against the US dollar and euro as a recovery in UK shares on the FTSE stock market helped ease concerns over the fragility of the economy.

Data on UK jobs growth was relatively poor and this put a cap on the strengthening pound. Against the euro, the pound was broadly stronger but sterling seems to have lost the post-budget momentum as gains related to sentiment have given way to concerns that the tax hikes and spending cuts will dampen growth and harm the UK recovery.

Many analysts are concerned that the government will struggle to effectively implement the spending cuts, with industrial action being a potential stumbling block. Despite these concerns, the pound has strengthened this morning to a two month high against the US dollar as sentiment towards the Euro zone improves and investors look to 'riskier' assets in the UK and Euro zone.

The big event today is the Bank of England interest rate decision. The rate is expected to stay the same and the emergency funding is likely to remain on hold. However, if this does change, there will be considerable volatility.

In the Euro zone, final GDP for the quarter came in as expected at 0.2%. There was however slightly poor data in the form of the French trade balance whereby the deficit increased by €1.5bn.

In addition, against an expected increase of 0.5%, German factory orders fell by 0.5%. Out today there is data on the German trade balance and also a press conference by the European Central Bank following the interest rate decision - the press conference is normally fairly scripted, but the 'free questions' can sometimes prompt volatility if there are any controversial statements.

In the USA, there was a lack of data released in the region yesterday, and the US dollar traded on sentiment. Similarly today, there is very little relevant data as the US dollar takes a back seat ahead of a busy set of data from the UK and Euro zone. Already this morning, the US dollar has given away ground to other currencies on risk sentiment movements. Get in touch now to avoid missing out on the best rates.

Elsewhere, Australian employment figures surprised many with the economy adding 45,900 jobs in June - easily beating the 15,000 estimate. The rate of unemployment for May was also revised downwards. This saw the Australian dollar strengthen against all other major counterparts as increased employment boosted expectations for higher inflation.

* Smart Currency Exchange is a currency partner to Harpers Wine and Spirit. Harpers Wine and Spirit has teamed up with Smart to provide readers with a free bespoke currency service.

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