Sterling jumped to an 8 week high against the US dollar and moved up against the euro after speculation that the Bank of England could raise interest rates as early as May. Sterling hit $1.5953/£1 and 1.1974/£1 as traders speculated that tomorrow’s Consumer Price Inflation could show inflation close to 4% – 2% above the Bank of England’s target level. The dilemma being faced by policy makers is that any interest rate hike could dent the UK’s fragile recovery – especially as the recent VAT hike and cuts have yet to take full effect. A higher than expected CPI figure is likely to see further sterling strength later today so ensure you call in now for a live exchange rate.
In the euro zone, the euro fell broadly yesterday after investors reassessed ECB President Jean-Claude Trichet’s call for interest rate rises last week and also saw that no ‘quick-fix’ was to be put in place for the euro zone’s bail out fund. The majority of finance ministers in the region today called for an increase in the lending capacity of the emergency fund to 700bn, but Germany was reluctant to push through urgent changes citing a calmer bond market and an aim to discuss ‘anti-crisis measures’ in more depth in March. Germany clearly does not want to increase the rescue fund, and as such sentiment towards the single currency slipped. Out today, there are economic sentiment figures for the region, so call in now for a live exchange rate.
Trading conditions were pretty thin in the USA with a public holiday, but off the back of euro weakness, the US dollar was up 0.65% against the euro but dipped against sterling on interest rate expectations. It did not see much reaction to comments from top Federal Reserve official Charles Plosser who did not rule out an interest rate rise in 2011 – it seems everyone wants to jump on the interest rate hike bandwagon. Out today, we have some manufacturing data and figures on foreign investment into the USA, so call in now for a live exchange rate.
Elsewhere, on the eve of Chinese President Hu Jintao’s visit to the USA for a summit with President Obama, a group of senators are looking to re-introduce a bill to combat China’s currency policies. Senator Charles Schumer said that the artificially low exchange rate was like a “boot on the throat” to the US economic recovery as it gave Chinese exporters an unfair advantage over their UScounterparts by artificially keeping the goods cheaper internationally.
EURO/GBP – 1.1960
US$/GBP – 1.5971
CHF/GBP – 1.5315
CAN$/GBP – 1.5722
AUS$/GBP – 1.6002
ZAR/GBP – 10.9607
JPY/GBP – 131.74
HKD/GBP – 12.4209
NZD/GBP – 2.0674
SEK/GBP – 10.6525
US$/EURO – 1.3350
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