Sterling strengthened against the US dollar and euro yesterday after stronger than expected UK services sector activity data came in better than expected, although further gains looked limited by an overall gloomy outlook for economic growth. Recovering from a 3 month low in May the services PMI data saw sterling jump a cent against the US dollar to hit a session high of $1.6128/£1 beating forecasts of a fall to 53. Recently, poor economic figures had seen investors reduce bets on a stronger pound, so this news came as a welcome surprise. However, the Bank of England is still expected to keep its main rate unchanged at 0.5% on July 7 when it announces its next monetary-policy decision. Out today, there is house price figures so call in now for a live exchange rate.

In the euro zone, the euro dropped for the first time in seven days against the US dollar after credit rating agency Moody’s said that banks rolling over Greek bonds into new securities may incur impairment charges. There is a lot of head scratching going on as to the best way to support Greece and many prospective plans are being shot down by rating agencies. The euro also slipped against the safer haven currencies on concerns over China. Later this week, the ECB is forecast to raise interest rates. Call in now for a live exchange rate.

In the USA, the US dollar strengthened against most other currencies on speculation that China’s efforts to tame inflation will cool growth and dampen demand for riskier assets. China is likely to raise interest rates to combat inflation that may have reached 6.2% in June, according to market estimates. Another option that may be taken is to manipulate the currency peg to allow the Chinese yuan to appreciate and slow the amount of exports by making the prices higher to overseas buyers. Out today there is non-manufacturing PMI in the USA, so call in now for a live exchange rate.

Elsewhere, the Australian dollar weakened as the nation’s central bank left interest rates unchanged. The Reserve Bank of Australia kept its base rate at4.75% for a 7th straight meeting as signs of slower growth from Europe and China dimmed prospects for acceleration in growth. Call in now for a live exchange rate to avoid losing out.

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