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Currency update, August 5: fall for sterling

Published:  05 August, 2010

Currency update for August 5 from Smart Currency Exchange: sterling slips off Tuesday's highs as data suggests the UK economy may continue to struggle.

Currency rates, August 5:
EURO/GBP - 1.204
US$/GBP - 1.583
CHF/GBP - 1.663
CAN$/GBP - 1.606
AUS$/GBP - 1.733
ZAR/GBP - 11.532
JPY/GBP - 136.57
HKD/GBP - 12.298
NZD/GBP - 2.181
EURO/US$ - 1.315
HUF/GBP - 338.24

Sterling slipped off Tuesday's highs as weaker than expected data on the UK services sector highlighted the possibility that the UK economy may struggle to match the better than expected growth posted in the first half of the year. The figure showed that the services sector was still growing, but not at the rate that had been expected. As a result, sterling fell off from the $1.5968/£1 level seen on Tuesday and is now trading around the $1.58/£1 level.

House price data helped sterling, showing prices rose by 0.6% and strong earnings data from Lloyds TSB also helped keep the pound afloat. So far today, Barclays has released strong earnings figures, but a drop in Investment Banking profits has concerned investors. Out later today, there is the Bank of England's interest rate decision for the month - widely expected to remain on hold.

In other news, the Chinese government investment fund is rumoured to have sold $558 million worth of shares, equating to £351.4 million - the exact amount of Liverpool FC's club debt, sparking rumours that the Chinese government will announce a takeover.

In the Eurozone, the single currency had a fairly quiet day, gaining marginally against sterling after the poor UK PMI data. Data in the region showed that retail sales were flat for the month, and European services data showed a small drop.

In terms of data, the interest rate decision for the Eurozone is released later today, with ECB President Jean-Claude Trichet scheduled to take questions in a press conference following the announcement.

In the USA, data released yesterday was positive. The ADP non-farm payroll (an important precursor to the key government figures released tomorrow) showed that the US economy added 42,000 jobs last month. Purchasing manager data came in better than expected. Today, there is important unemployment data on the number of claims made for unemployment benefits.

Elsewhere, unemployment in New Zealand rose by 0.8% which came as a surprise. In addition, quarter on quarter employment declined by 0.3%. This saw the NZ dollar weaken, as interest rate expectations fell.

* 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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