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Sterling falls on UK debt and a declining GDP at −1.9% today

Fri, Apr 24 2009, 10:51 GMT
by Benny Menashe

Finotec Group Inc.  |  View company's profile

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The Pound fell on Friday, hitting a two-week low against the euro, with traders citing a UK newspaper article flagging risks to Britain's sovereign credit rating, while data showed today a contraction in UK growth at -1.9%. Sterling fell to its weakest level against the euro since mid-month after The Telegraph newspaper reported Moody's and Standard & Poor's were reviewing their rating on the UK after the government said the national debt would reach 1.4 trillion pounds in the next five years. Darling revealed Britain will run a budget deficit of 12.4 percent of GDP and have to issue a record 220 billion pounds of gilts for the fiscal year. The GBP/USD is currently trading at $1.4618 as of 10:30am, London Time.

The dollar fell as it suffered on Thursday, when a net quarterly profit at Credit Suisse and a six-month high in a key euro-zone manufacturing index bolstered risk appetite, eroding safe-haven flows into the greenback. The euro, which rose more than 1 percent against the dollar on Thursday and has pulled up from a one-month low of $1.2885, may face some profit-taking pressure on Friday, said a trader for a Japanese foreign exchange broker. A meeting of Group of Seven finance ministers in Washington on Friday was seen as unlikely to be a major focal point for the currency market. The EUR/USD is currently trading $1.3230 as of 11:00am, London Time.

The Aussie and kiwi dollars dropped against the yen, completing weekly losses, on speculation the global recession will damp demand for the two nation’s exports. Australia’s dollar also completed a weekly decline versus the greenback on concern the nation’s jobless rate will rise and after Prime Minister Kevin Rudd said the first recession in almost two decades will cut tax receipts by more than A$115 billion ($82.1 billion).
“Through to mid-April everything looked optimistic and colorful, but sentiment is changing now,” said Daisuke Uno, chief bond and currency strategist at Sumitomo Mitsui Banking Corp. in Tokyo. “There’s speculation that employment figures will be bad, which may be weighing on the Aussie dollar.” The AUD/USD is currently trading at 0.7160 as of 11:05am, London Time.

Today's Economic Events

Published on  Fri, Apr 24 2009, 10:57 GMT

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