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Currency update, August 3: sterling hits six month high against dollar

Published:  03 August, 2010

Currency update for August 3 from Smart Currency Exchange: sterling hits six month high against dollar
For specialist drinks currency advice go to


Currency update for August 3 from Smart Currency Exchange: sterling hits six month high against dollar.

For specialist drinks currency advice go to

Currency rates, August 3
EURO/GBP - 1.206
US$/GBP - 1.595
CHF/GBP - 1.653
CAN$/GBP - 1.636
AUS$/GBP - 1.753
ZAR/GBP - 11.686
JPY/GBP - 137.06
HKD/GBP - 12.382
NZD/GBP - 2.178
EURO/US$ - 1.322
HUF/GBP - 339.31

Sterling continued to strengthen against the US dollar and euro yesterday after the FTSE jumped by 2.5% following strong earnings data from the banking sector.

Sterling hit a six month high of 1.5950/£1 against the US dollar and a four week high of €1.2111/ £1 against the euro.

Shares in Europe's largest bank HSBC jumped by 5.2% after first half profit more than doubled to $11.1bn - significantly beating expectations. The strong results helped drive appetite for riskier currencies as strong performance from HSBC showed evidence of a healthy banking sector, and given the banking sector's contribution to the UK economy this in turn drove demand for sterling.

Data on the UK manufacturing sector came in better than expected, with demand and employment higher than expected. Today data released on house prices and construction sector activity showed a mild decline on last month. House price data has been relatively poor over the last few months, but one report out today suggested that house prices would rise by 20% over the next two to three years.

In the Eurozone, the euro strengthened against the US dollar hitting $1.3125 after demand for riskier currencies helped drive demand for the euro.

However, the euro weakened against the pound after rumours circulated over a proposed sale of UK branches of RBS to Spanish bank Santander which could yield £1.8bn, which would need to come from euros.

Manufacturing data came in slightly better than expected and later today we have purchasing manager data which is expected to show a slight improvement.

In the USA, the US dollar fell broadly against both sterling and the euro as risk appetite saw investors relinquish 'safe haven' US dollar holdings in favour of riskier assets. Relatively poor US data over the last few months has left the US dollar reeling - especially after the poor GDP data last Friday.

Manufacturing and construction data were positive today, but analysts feel that the US dollar is rebalancing against sterling. After a sustained period where the price of the pound has reflected disaster in the financial sector, today's HSBC results have for many seen that risk disappear. Whilst this is not strictly true, a return to a strong banking sector in the UK is a very good thing - let's hope it isn't just a flash in the pan.

Elsewhere, the Australian dollar was little changed after the Reserve Bank of Australia kept interest rates on hold at 4.5%. RBA Governor Glenn Stevens said that the current levels were appropriate - especially given the time lag between rate changes and the eventual effect on the 'real' economy.

Consumer credit dropped sharply last week - attributed to the rate hikes of six months ago.

* 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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