Sterling surged to a one month high against the euro but slid against the US dollar as calls from Greek PM George Papandreou for a referendum on the EU bailout sent markets into chaos. Sterling fell just short of €1.17/ £1 as it hit €1.1697/£1 on the news. There was mixed data released in the UK yesterday, with manufacturing activity posting a sharp contraction against expectations leaving investors concerned over the UK recovery. UK GDP growth figures came in above expectations, showing 0.5% growth in the last quarter against an expectation of 0.4% however the data is notoriously inaccurate and subject to change at a later date. Yesterday is a prime example of why it is important to put a currency strategy in place to take advantage of large swings.

In the euro zone, Greek PM George Papandreou sent markets into a tail spin yesterday morning after calling for a referendum on the Greek bailout package. The implications of a potential ‘no’ vote are the likely bankruptcy of Greece and the country’s withdrawal from the euro – both of which are a worrying prospect. The euro did begin to recover slightly against the US dollar after Nicolas Sarkozy and Angela Merkel said they were committed to the deal agreed at last week’s EU summit. Call in now for a live exchange rate.

In the USA, stock markets took a hammering yesterday as the shock announcement sent investors fleeing to safer assets. The US dollar was a major beneficiary of the sudden flight to safety and it made gains against most currencies – especially with the Japanese yen and Swiss franc effectively no longer safe haven currencies due to government intervention. The US dollar gained by around 2 cents against sterling. Call in now for a live exchange rate.

Elsewhere, the Reserve Bank of Australia cut interest rates by 0.25% overnight into yesterday morning which helped to see sterling make gains against the currency. Sterling also strengthened against other ‘riskier’ currencies, breaking above ZAR 13.00/ £1 and NZ$2.00/ £1 against the South African rand and New Zealand dollar.

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