Difficult week for sterling especially against the dollar | Smart Daily Currency Note

Sterling

A difficult week for sterling especially against the US dollar and to a lesser extent against the euro. This contrasted with sterling gaining  ground when compared to the commodity backed currencies. Thursday saw the release of better than expected retail sales data which gave some support to sterling yesterday, helping the UK currency to stabilise after Wednesday's losses. Sterling traded within a relatively narrow range against a surging US dollar whilst posting modest gains against the euro. However, it remains to be seen if sterling will be able to hold its ground against the dollar as the Monetary Policy Committee's uncertainty is now in stark contrast to the Federal Reserve's newly assertive attitude towards quantitative easing strategy. The only UK news with the potential to directly affect sterling performance today is the release of public sector net borrowing data, which will show the difference between income and expenditure in the public sector during the month of May. Call in now to see how sterling prices react to continuing dollar strength ahead of Mark Carney taking over as the Governor of the Bank of England next month.

Euro

The single currency has performed well for much of the week, but after rising to a four month high against the US dollar the euro lost ground in many pairings following poor German manufacturing sector data. Though many areas of the report outperformed (and despite better service sector figures and evidence of slower decline in new business) the composite output index still described manufacturing activity shrinking overall. French manufacturing results similarly showed a contraction though not to the extent many had anticipated, with the euro losing around half a cent against sterling. With only news on the European current account balance today there is going to be increasing pressure on Mario Draghi and the European Central Bank to find innovative ways of stimulating the economy. The question is, what can turn the tide and get the euro back on an upward trend. Call your trader today for the latest news and the best live prices on your euro trades.

US dollar

The US dollar had a good week in the wake of the Federal Reserve's news that it plans to taper back its quantitative easing initiative. Volatility in currency markets as a result were at the highest levels in a year as the US currency forged ahead against its most traded counterparts. This performance is set to continue as long as the world's largest economy keeps improving – especially in regard to employment figures. Despite news that jobless claims had in fact increased last week, better than forecast factory activity and home sales figures increasing over 4% helped extend dollar value, with the reserve currency also being bolstered by investors selling off interest in other currency markets seeking a safe haven. What needs to be noted though is that the US dollar is only back to the level it was against sterling two weeks ago. In the interim there has been a two cent up and down movement but this seems to point to a correction rather than a full blown collapse for sterling.  Call your trader with any US dollar currency requirements to discuss how to maximise your potential in this market.

Worldwide

Elsewhere, US dollar strength weighed heavily on world currency markets. India's rupee fell by 1.5% against the US dollar - a record low. Similarly, due to the on-going political turmoil in the region, Turkey's lira was at an all-time low against its American counterpart on Thursday whilst the Polish zloty dropped by 2%. The Australian dollar continued its slide, falling for a fifth day, exacerbated by the Chinese purchase Managers Index for the manufacturing sector posting lower than expected results. The relationship between Chinese economic growth and Australian currency strength remains close, and price levels are likely to keep sliding along with interest rate levels as long as expansion in the Chinese economy continues to decelerate. The Bank of Japan Governor speaks this morning whilst Canadian inflation and retail sales data are certain to impact Canadian dollar prices heavily. Keep up-to-date by calling Smart today.