Royal Currency Review by Royal Alliance UK Group
Financial Community is an independent publication specializing in international currencies and country risk analysis, with extensive investigative and country reports.
June 27, 2011
Sterling has fallen to historic lows versus the Swiss franc and New Zealand dollar. The fall came after the latest release of the Bank of England’s (BoE) policy meeting minutes.
Seven of the Bank’s nine policymakers voted to leave interest rates at 0.5%, compared with six in May. Andrew Sentance, a known advocate of higher interest rates, left the policy committee last month. His replacement, Ben Broadbent, voted for current monetary policy to remain unchanged. The Bank also commented inflation could rise above 5% later this year, but remains wary that weak domestic demand might curtail the UK’s economic performance in the coming months.
The euro failed to make any meaningful headway last week as doubts remained as to whether a second Greek bailout could be agreed. However, stock markets were buoyed on Friday as both the European Union and International Monetary Fund agreed in principle to an additional €120 billion bailout package, assuming the recession-hit country passes an austerity package this week.
Economic announcements disappointed. German economic sentiment data, euro zone industrial new orders data and consumer confidence figures all fell short of expectations.
The US dollar’s strong run continued, adding over two cents against the pound and a cent versus the euro. The dollar’s perceived ‘safe haven’ status went some way to helping, as global markets continue to be buffeted by uncertainty. US data releases were also supportive.
The housing price index and new home sales data showed gains in their respective releases, whilst the US economy grew more-than expected during the first quarter of 2011. However, Federal Reserve Chairman Ben Bernanke issued a fairly downbeat statement after Thursday’s interest rate decision. Leaving rates unchanged, Bernanke warned that the economic outlook is ‘inherently uncertain’ as the slowdown in Economic activity could be ‘longer lasting’, and reiterated that the recovery in employment remains ‘frustratingly slow’.
Commodity-bloc currencies such as the South African rand, Australian dollar and Canadian dollar found their performances stunted by a fall in the prices of gold and oil.
The Australian dollar was also hindered by comments from the Reserve Bank of Australia (RBA) as it expressed concerns the global recovery might stall. The Canadian dollar was disappointed after Canadian retail sales data fell more-than-expected.
The Norwegian krone was left unharmed as its central bank left interest rates unchanged at 2.25%, whilst the New Zealand dollar continued to enjoy its rich vein of form by adding an additional two and a half cents against the pound.