Pound Under Pressure

The Pound is at a seven week low against the Euro, caught in the cross-fire of Euro and US Dollar movement whilst suffering from a wave of poor economic data releases this morning.

Pound Sterling – UK Markets

The Pound has plunged against the Euro trading at 1.1741 at 10.20 am this morning. Economists are suggesting that Sterling is still largely at the mercy of broader market movements between the Euro and the US Dollar. Weak UK public finance data this morning however has fueled the fall further against the Euro and the US Dollar. Public Sector Net Borrowing was anticipated to come in at £13.2 Billion but didn’t meet expectations at £14.5 Billion. The amount of UK mortgage approvals has also come in as less than forecast as well as below previous figures. Tomorrow the Bank of England releases their latest set of minutes. Markets will be interested to see whether any more policy makers join Andrew Sentence this time round in voting for an interest rate increase which may help shore up confidence. GDP figures due on Friday will also be crucial.

US Dollar – US Markets

The Dollar continues to be under strain as the Euro made gains on the currency yesterday and today following yet more negative news on the US economy following a weak housing report. Data on building permits and housing starts due later today will give a further picture of the US building and housing market.

Euro – European Markets

The Euro rose close to a two month high against both the US Dollar and Sterling with Ireland’s credit rating downgrade and the withdrawal of Hungary’s EU rescue package not having a large impact. The European bank stress test results due on Friday are pushing up optimism on the single currency as they may prove to markets that European banks are in a healthier state than feared – the Spanish Finance Minister for example has spoken out about Spain’s confidence in the results of their banks. A picture of Greek banking support has been given - ECB funding of Greek banks rose 4.9 percent in June from May.

Other Currencies – Highlights

The Australian Dollar has ended three days of losses. Minutes from the Reserve Bank of Australia suggest that they will use the results of this Friday’s European bank stress test results alongside local inflation figures to decide whether to resume raising interest rates. The Yen has weakened against all of its major counterparts as importers sold the currency and on speculation that the Bank of Japan may intervene to weaken the currency after it climbed to a seven month high against the US Dollar last week. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.