Sterling fell to a new 5 ½ month low against the US dollar yesterday after UK consumer price inflation unexpectedly dropped which prompted investors to push back expectations of an interest rate hike in the UK. Inflation fell to 4.2% from 4.5% unexpectedly in June and the trade gap widened by £0.9bn, pointing to further weakness in the economy and vindicating those in the Bank of England who have long been predicting that inflation will fall off. Combined with last week’s poor industrial and construction figures, there is speculation that UK GDP will be poor in the 2nd Quarter of 2011. Call in now for a live exchange rate.

In the euro zone, the euro came under further pressure yesterday, dropping against sterling, with the pound rising above the €1.14/£1 mark for the first time in several weeks as investors became increasingly concerned over the European debt crisis. An emergency meeting of European Finance ministers over Monday and Tuesday failed to reach any form of plan to restructure Greek debt and Spanish and Italian government borrowing costs spiralled on the bond markets. This saw the euro hit a record low against the Swiss franc for a second straight day and a four-month low against the US dollar on fears that European leaders were failing to prevent the crisis from spreading. Call in now to ensure you set a budget level and take advantage of any large movements.

In the USA, the US dollar gained against the euro and sterling but started to slip against both in late trading as government trade data showed that the USA’s trade deficit widened by more than had been expected in May to hit $50.2bn. The US dollar is being driven by risk related trade and as a result, hit its highest against a basket of currencies in more than three months on uncertainties about the Greek and Italian debt crisis.

Elsewhere, the Canadian dollar fluctuated against it’s the US dollar as the US dollar’s allure as a safe haven currency countered speculation that global growth may suffer as Europe’s debt crisis escalates and the U.S. recovery falters. The Japanese yen (another safe haven currency) also gained broadly – gaining by 1% against the US dollar. Call in now for a live exchange rate.

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