Sterling falls against the Dollar and the Euro as the G8 meet

The British Pound fell against the greenback on Friday, snapping a four day winning streak as investors took their profit ahead of the weekend and a Group of Eight finance ministers meeting. The Sterling also lost some momentum against the euro after rallying throughout the week to its highest level in 2009 on a growing belief that the UK economy is now poised for a recovery. Comments from incoming Bank of England policymaker Paul Fisher helped weigh on sterling as he warned against complacency despite signs of a recovery and said economic output was likely to fall in the second quarter. UK finance minister Alistair Darling struck a similar cautious note, warning that rising oil prices had the potential to be a "huge problem" for any recovery. Investor caution ahead of the G8 meeting in Italy on Friday and Saturday helped the recovery of the dollar against most major currencies. The GBP/USD is currently trading at $1.6310 as of 8:30am, London Time.

The greenback rose against the euro after Russia’s Finance Minister Alexei Kudrin said the Russian nation has full confidence in the U.S. currency. The greenback advanced against most currencies as Kudrin said in an interview on June 13 that it was too early to speak of an alternative to the world’s reserve currency. The euro extended its fall against the dollar after Britain’s Daily Telegraph newspaper cited Germany’s top industrial group as saying credit conditions in Europe’s largest economy are worsening. The greenback Index rose after Russia’s Kudrin said the fundamentals of the U.S. currency are still in “good shape.” He spoke following a meeting with finance ministers from the Group of Eight nations in Lecce, Italy. The G-8 finance ministers said in a statement they will start planning exit strategies for when sustainable growth returns. It’s still too soon to roll back budget deficits and bank bailouts, they said. The EUR/USD is currently trading at $1.3870 as of 8:55am, London Time.

The economic woes and bankruptcies at Chrysler LLC and General Motors Corp. is likely to reverberate through the industry and the economy in coming months, even as other areas are showing improvement. Falling home prices, near-record low mortgage rates and tax credits for first-time buyers should help bring an end to the worst residential construction slump in seven decades. General Electric Co. is one of the companies starting to see some improvement in the economic conditions. Chief Executive Officer Jeffrey Immelt said at a conference last week that government efforts to thaw credit are starting to pay off, making it easier for companies to borrow. “Capital markets have largely healed,” Immelt said. “As a company you have to invest now. You have to invest when things are darkest.” Immelt predicted the economic recovery will be slower than that following the 1982 recession, the last slump that approached the severity of the current downturn.

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