Sterling hits high due to UK service sector growth

Published: 31 March, 2011

Sterling recovered from Tuesday's five month low against the euro and strengthened by 0.7% to hit a high of €1.1424/£1.

Currency rates - March 31

EURO/GBP - 1.1375

US$/GBP - 1.6136
CHF/GBP - 1.4777
CAN$/GBP - 1.5666
AUS$/GBP - 1.5620
ZAR/GBP - 10.9430
JPY/GBP - 133.916
HKD/GBP - 12.5626
NZD/GBP - 2.1192

SEK/GBP - 10.1512
US$/EURO - 1.4184

t also made gains against the dollar hitting a daily high of $1.6083/£1 after data showed UK service sector activity grew at the fastest monthly pace in January since July 2002. In addition, sterling benefited as Bank of England policymaker Martin Weale declared that the bank should increase interest rates as there is a high risk that inflation will not return to its 2% target. House price figures from Nationwide are expected later today and are expected to show a small drop.

In the euro zone, the euro took a slight hit today falling by 0.4% against sterling. Despite this fall on the back of sterling strength, the euro is up 2.3% on the year and is currently buoyed by market expectations that the European Central Bank's will raise interest rates before the Bank of England. Many analysts believe that this will happen as early as next month. Out today there is German retail sales data and European inflation - both of which could cause volatility.

The US Dollar stayed fairly flat yesterday. There is a high possibility that the dollar will remain supported throughout the week after a key Federal Reserve official said that the central bank may have to tighten monetary policy to avoid inflation. US ADP non-farm payroll (a key pre-cursor to Friday's headline figures) came in slightly lower than expected but did not cause much movement. Today sees weekly unemployment figures.

Elsewhere, Asian currencies strengthened yesterday on rumours that the central banks in the region will increase interest rates in order to avoid inflation. The South Korean won lead the way gaining by 0.6% against the US dollar. Call in now as there is a lot of volatility in the market - especially with the situation in Japan.

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