- 1.324 / £, compared with 1.336 last week
- US dollar
- 1.957/ £, compared with 1.973 last week
- Canadian dollar
- 1.996 / £, compared with 1.973 last week
- Australian dollar
- 2.189/ £, compared with 2.259 last week
- New Zealand dollar
- 2.489 / £, compared with 2.571 last week
- Swiss Franc
- 2.157 / £, compared with 2.181 last week
- South African Rand
- 13.348 / £, compared with 13.579 last week
Charles’s Thoughts: Sterling continues to be friendless. The Bank of England kept UK interest rates on hold. The BOE have a difficult balancing act. The economy is suffering but inflation is on the up. We have seen sterling lose 10% plus against the Euro in a very short period in time. This will help make our exports more competitive. However at the same time it makes our imports more expensive thereby adding to the inflationary pressures. Retail figures have been mixed. M&S had a poor Christmas whereas Sainsbury and John Lewis seemed to do well. Also the credit crunch continues to be a problem with banks still wary in lending to each other. So overall not a happy situation which will take a while to work through. So we wait to see where the bottom is for sterling.
The US$ continues to gain against sterling and lose against most other currencies. The US has very similar problems to the UK with large budget and balance of payment deficits and an interest rate that will be reduced significantly this year. What they will do relative to each other is difficult to assess but the market probably errs on the side of the US$ given how much it weakened against sterling last year.
The euro is all conquering given the sorry state of sterling and the US$. The European Central Bank kept interest rates on hold and have made it clear that they will not be reducing interest rates any time soon as inflation is their major concern. It is thought very unlikely the ECB will increase interest rates given the parlous state of western economies. Euro land exports must be suffering but as yet this does not seem to be a major factor in the ECB’s thinking.
Sterling seems to have lost ground against most currencies apart from the Canadian $. This seems to be on the back of the market expecting Canadian interest rates to be cut following domestic building permits coming in below expectations.
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