Sterling strengthened against a weaker US dollar yesterday after risk appetite improved following good demand at a Spanish bond auction. Sterling slipped from earlier highs against the euro after poor manufacturing figures showed that the sector had contracted for a second month in a row. Whilst there is improved risk appetite, sterling could be set for gains against the euro if European policymakers fail to address the crisis effectively in the coming days. This week has seen poor prospects for sterling as the outlook for growth was slashed in George Osborne’s autumn statement. In terms of data, there is construction sector activity data released later today which is expected to show a contraction. Call in now for a live exchange rate.

In the euro zone, despite Spain’s borrowing costs hitting the highest levels for 14 years, there was widespread relief that the country managed to sell the full amount of debt at a closely watched bond auction yesterday. This was important as it was a key gauge for investors as to market sentiment over Spain’s ability to cover its debts. Analysts expect sterling to strengthen over the coming months against the euro as investors move funds into UK government bonds, which remain AAA rated by all major rating agencies. Call in now to ensure you are in a position to take advantage.

In the USA, the US dollar slid against the euro for the 4th day in a row as risk appetite steadily improved over the week. With many investors positioning themselves for today’s key employment number – non farm payrolls – it was a relatively quiet day for the US dollar. US data has been better than expected this week, which has added to the improving picture for the US recovery. Call in now for a live exchange rate.

Elsewhere, the commodity backed currencies have had a strong week making gains off the back of improved risk appetite despite the crisis in Europe. Wednesday’s co-ordinated action by central banks to ease the US dollar swap rate improved sentiment globally. Call in now for a live exchange rate.

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