Currency update, September 20: sterling holding firm

Published: 20 September, 2010

Sterling slipped against the US dollar on Friday, coming off an earlier 5 week high of $1.5730/£1 but holding firm above the $1.56/£1 level.

Currency Rates

EURO/GBP - 1.193
US$/GBP - 1.564
CHF/GBP - 1.571
CAN$/GBP - 1.612
AUS$/GBP - 1.652
ZAR/GBP - 11.139
JPY/GBP - 133.92
HKD/GBP - 12.144
NZD/GBP - 2.140
EURO/US$ - 1.310
HUF/GBP - 335.20

Sterling slipped against the US dollar on Friday, coming off an earlier 5 week high of $1.5730/£1 but holding firm above the $1.56/£1 level. A lack of UK data on Friday left sterling at the mercy of movements in other currencies and as concerns over Euro zone sovereign debt resurfaced, riskier currencies came under renewed pressure. In the last few weeks, huge swings between positive and negative sentiment mean that sterling is generally tracking the movements between euro and US dollar. It is a relatively quiet day on the economic calendar with the key data being the August mortgage approvals figure. The figure is expected to come in at just under 50,000 - historically a figure that does not correlate with a sustained house price boom. A lot of data points to further slowing in the sector. Later in the week, there is public sector lending figures and the Bank of England Monetary Policy Committee's minutes from their recent meeting.

In the Euro zone, Friday saw a fresh round of concerns over the debt crisis in Europe as rumours spread that Ireland was seeking help from the International Monetary Fund (IMF). The Irish government quickly denied these rumours but the euro lost nearly a cent against the US dollar despite being the best performing currency for the week. This shows how sensitive traders are to any sign of problems with debt in the region. There are no real data releases today with the key releases of the week being a business sentiment survey and advanced wholesale price inflation later in the week.

In the USA, the US dollar has been under significant pressure over the weekend and in Asian trading today ahead of a busy week of data. The key area of concern for many is Tuesday's Federal Reserve meeting in which many are expecting the Fed to start printing money again after stubbornly high unemployment figures and a run of poor data. The idea was raised at last month's policy meeting and could be implemented this week. Housing data is the only real data released today.

Elsewhere, the Australian dollar surged higher after Glenn Stevens of the Reserve Bank of Australia stated that economic growth down under is likely to be "above trend" in 2011. This saw interest rate expectations surge with one gauge giving a 29% chance of an interest rate rise at the next meeting.

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