|Sterling hits six month low against euro|
|Written by Richard Siddle|
|Friday, 22 October 2010 15:39|
Currency analysis October 22 from Smart Currency Exchange. To get bespoke currency advice go to www.smartwinespirits.com.
Sterling fell to a six and a half month low against the euro yesterday after poor UK retail sales data left investors concerned that the Bank of England would look to inject further stimulus to restart the ailing recovery.
Data released showed that retail sales dropped for the second month in a row which left many feeling that the recovery had peaked. Combined with the fact that Bank of England member Adam Posen voted for a resumption of stimulus through further Quantitative Easing, investors are seriously concerned about the prospects for the UK.
The fallout from yesterday's spending review did not help sterling either, with David Cameron and George Osborne vigorously defending the spending cuts. There are concerns that the cuts will adversely impact the growth prospects moving forward.
In the euro zone, there was a wide range of purchasing managers data released yesterday, with manufacturing figures coming in better than expected and services data slipping. Consumer confidence came in slightly worse than expected at -11 against an expectation of -10.
Following relatively downbeat comments from US Treasury secretary Timothy Geithner, the euro gained 0.4% against the US dollar as investors piled in to the single currency on the belief that European interest rates would move away from the US rates.
In the USA, the US dollar saw a lot of volatility yesterday as comments from Secretary Geithner left investors weighing up the impact of further Quantitative Easing. The prospect of further stimulus from the Federal Reserve has seen the US dollar slide by more than 10% against major counterparts. Unemployment claims fell by 25,000 on last week, but this did not stem the tide of US dollar weakness yesterday.
Elsewhere, Chile has announced that it will help exporters hit by a strong Chilean peso by cutting red tape on customs regulations. Chile is on of the only Latin American countries that has not intervened to stem the advance of their currencies following large inflows of overseas funds.
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