Sterling strengthens on data

| July 21, 2006 | 0 Comments

Sterling was stronger as analysts began to be more and more convinced that UK interest rates will be higher by the end of the year as several measures of economic health seem to be showing the UK economy to be in good shape. Figures from the housing markets, retail sales, the money supply, consumer price inflation, and the growth of the gross domestic product all point to a greater chance that the Bank of England will soon hike rates, possibly as soon as next month.

The UK currency added 1.1 percent to $1.8582 versus the US dollar, while it was 0.8 percent higher in relation to the euro, to £0.6824. Sterling was also 1.2 percent higher against the Japanese yen to ¥216.21 and it gained 1.3 percent to SFr2.2991 versus the Swiss franc.

The US dollar endured changing sentiment during the week. Early in the week, most analysts were betting that interest rates would be raised again in August but by the end of the week, after Congressional testimony by Federal Reserve chairman Ben Bernanke, the majority had changed their minds about the possibility of such a rate hike. The greenback was 0.2 percent stronger in relation to the yen by the end of the week to ¥116.35, but it had lost 0.2 percent to the euro, to $1.2678.

Elsewhere, the New Zealand dollar was 0.9 percent higher versus the US dollar to $0.6248, while the South African rand had added 2.4 percent to R7.015 to the dollar and the Icelandic krona added 2.1 percent to IKr73.45 to the dollar.

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