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Sterling gains against US dollar over oil price concerns

Published:  01 March, 2011

Sterling gained against the US dollar yesterday as concerns over the price of oil dented the US currency.

Sterling gained against the US dollar yesterday as concerns over the price of oil dented the US currency.

Currency Rates

EURO/GBP - 1.1800
US$/GBP - 1.6320
CHF/GBP - 1.5167
CAN$/GBP - 1.5842
AUS$/GBP - 1.6038
ZAR/GBP - 11.320
JPY/GBP - 134.04
HKD/GBP - 12.710
NZD/GBP - 2.1702
SEK/GBP - 10.2781
US$/EURO - 1.3826

Sterling has benefited recently from expectations that the Bank of England is looking at raising interest rates by the summer. However, with this 'priced in' (already reflected in the exchange rate) to the sterling/US dollar exchange rate, there is not much room for a move beyond $1.6250/£1. It is also a very risky week for sterling, with a wide array of purchasing data from a number of key sectors of the UK economy. Poor readings from these surveys could quite conceivably unduly impact interest rate expectations in the UK and see sterling fall.

In the euro zone, the euro strengthened to the highest level against the US dollar since the start of February as investors speculated over an upcoming speech by US Federal Reserve Chairman Ben Bernanke. Many expect the US policymaker to maintain his soft approach to US monetary policy which contrasts with recent talk of tighter monetary policy in the euro zone. Inflation in the region hit a 2 year high of 2.3%, and is set to rise further in February as higher oil prices filter through.

In the USA, rising oil prices have caused concerns over US growth. Prohibitively high oil prices could see impact on the fragile economic recovery, and many investors are concerned over the impact on US foreign policy over the political upheaval taking place in the Middle East and North Africa. This saw the US dollar fall to a 3 .5 month low against a basket of currencies - not helped by poor pending home sales figures that came in worse than expected.

Elsewhere, the situation in Libya seems to be getting worse with world leaders putting pressure on the Libyan leader Muammar Gaddafi to leave power. From a currency perspective, any kind of instability has been benefiting the Swiss franc and there is no reason we won't see the Swiss currency strengthen further.

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