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Sterling/US dollar - best price in a year

Published:  24 February, 2011

Sterling gained against the euro and US dollar yesterday after Bank of England chief economist, Spencer Dale joined Martin Weale and Andrew Sentance in calling for higher interest rates to deal with stubbornly high inflation.

Sterling gained against the euro and US dollar yesterday after Bank of England chief economist, Spencer Dale joined Martin Weale and Andrew Sentance in calling for higher interest rates to deal with stubbornly high inflation.

Currency rates

EURO/GBP - 1.1776

US$/GBP - 1.6144
CHF/GBP
- 1.4959
CAN$/GBP
- 1.5964
AUS$/GBP
- 1.611
ZAR/GBP
- 11.5065
JPY/GBP
- 132.18
HKD/GBP
- 12.5851
NZD/GBP
- 2.1711

SEK/GBP - 10.388
US$/EURO
- 1.3707

However, a 0.25% increase in the next 6-12 months is already priced in, so sterling is unlikely to break beyond $1.63/£1 or €1.19/£1 without a major boost from some other economic data. This is the best GBP/USD price in nearly a year - it's a good time to buy the US dollar. Such is the nature of foreign exchange that we could feasibly see some poor economic figures released that reverses the view on interest rates and we will back in the mid-$1.50s.

In the euro zone, the euro had a fairly quiet day - supported against the US dollar by recent comments by European Central Bank policy makers over inflation in the region. Talk of interest rate hikes contrasts with the Federal Reserve's relatively loose monetary policy, and as such the euro has held firm despite some serious global uncertainty in the shape of unrest and uncertainty in the Middle East and North Africa. 

In the USA, turmoil in Libya has seen investors look to the safety of US government bonds and the Swiss franc on fears that a spike in the price of oil could impact the global recovery. Oil jumped over $100 per barrel as Libyan oil production shut down and fears over Middle Eastern oil supplies left investors concerned. Released today we have unemployment claims and new home sales data.

Elsewhere, a former Chinese central bank adviser called on East Asian economies to form an alliance to deal with the USA, especially on issues such as the USA's fiscal deficit. China plays a key role in currency, and could be a huge issue over the coming months, so it is certainly worth keeping an eye on.

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.

If you are making or receiving international payments and are interested in talking to Smart please go to: www.SmartWineSpirits.com to get a FREE no obligation quote or to download the Smart Wine and Spirit report. Alternatively call Smart on 0207 898 0500.

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