Euro Rallies Against Pound and Dollar

No surprises emerged from any of the central bank meetings yesterday. The Bank of England maintained rate levels at 0.5% and the European Central Bank also made no changes to the 1.0% interest rate despite talks of change that had emerged.

Pound Sterling – UK Markets

The GBP/EUR rate at GMT 1010 was 1.1984 and the GBP/USD rate stood at 1.5179. It was a rocky day for Sterling due to mixed data yesterday which meant that it could no longer hold onto the two month highs against the US Dollar. Initially, British industrial output hit its highest rates in ten years with a rise of 0.7% on last month and totaled the annual rate to 2.6%. Furthermore, annual manufacturing output hit a fifteen year high of 4.3%. So, whilst this was so far so good for Sterling, unfortunately, news surfaced that house prices fell for the third month running in June. The fall took the annual rate of increase to 6.3% which was down a further 0.3% on May. With UK Producer Prices input and output figures due out today, the results could give a further indication as to whether the inflation figures being released next week will cast doubt on the decision to freeze interest rate levels. Furthermore, the UK total trade balance for May to be released today is set to show a deficit of £3bn.

US Dollar – US Markets

The US released strong jobs data and retail sales figures yesterday which helped stocks hold on the previous day’s gains. Jobless claims fell further than predicted whilst store sales appear to have benefited from the warm weather and Memorial Day holiday. Whilst sales figures were mixed, with leading brands such as Costco, Target and Gap falling below expectations, overall the signs were positive. These trends have also helped ease earlier concerns of a double-dip recession.

Euro – European Markets

The EUR/USD rate at GMT 1010 was 1.2665. European Central Bank President, Jean-Claude Trichet instilled further confidence in the Eurozone yesterday as his much awaited post interest rates speech focused heavily on the upcoming bank ‘stress tests’. Many traders believe that because he spent so much time speaking about the tests there is a strong belief that they will yield good results. Although reports yesterday stated that German factory orders fell, on the flip side news flowing out of the Eurozone stated that industrial production came in stronger during May which has helped construction and industrial companies. Data coming out of the Eurozone has been positive recently which has caused the single currency to edge higher against both Sterling and the US Dollar.

Other Currencies – Highlights

The Australian Dollar made another surge as stronger than expected employment figures emerged yesterday. The data showed that a further 45,900 jobs were added in June, which was much better than initial predictions of 15,000. Furthermore, the strong rebound in global stocks helped boost commodity linked currencies with the Canadian Dollar, New Zealand Dollar and Norwegian Krone also seeing gains. There were worries previously that the Reserve Bank of Australia’s decision to raise interest rates in the wake of the financial crisis may prove to be a problem as the global recovery slowed. However, this has not been the case. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000