Best Euro and Dollar Exchange Rates Attained as Pound Sterling Soars - Will UK Business Start to Suffer?

Driving the GBP higher at the start of the new week is the continued strength seen in the UK economy with fresh news on the UK manufacturing sector coming from the business body the CBI.

However, there are growing concerns that the high forex rate could start to hamper UK economic growth as UK products become ever-more expensive on the international marketplace.  

At the start of the new week the following quotes are available for reference:

• Sterling to Euro exchange rate is 0.17 pct higher at 1.2533.
• Sterling to Dollar is 0.11 pct higher at 1.7033.
• Sterling to Aus Dollar is 0.36 pct lower at 1.8060.
• Sterling to NZ dollar is 0.35 pct lower at 1.9497.

Please be aware that the above mid-market quotes are subject to a discretionary spread levied by your bank. An independent FX provider will however seek to undercut your bank's offer and in some instances can deliver up to 5% more currency on execution. To learn more, please read here.

Sterling exchange rates supported by UK economic improvement

Demand for UK-made goods rose strongly in June, the latest CBI Industrial Trends Survey shows, giving fresh impetus to the GBP.

Total order books picked up, reaching their strongest level since December’s eighteen year high.

This strength was broad-based, with above average results in 14 out of the 17 sectors.

BUT is sterling its own worst enemy?

While the GBP has benefited from the news, the CBI's Katja Hall warns that the currency's strength could undermine further growth in the sector:

“Demand for British made goods remains buoyant and that’s helped drive this quarter’s further rise in output.

“Growth is broad-based, with the recovery spreading its roots, and firms have high hopes for the coming quarter.

“However, the recent rise in Sterling could impact on the resilient export orders we’ve seen lately.

“As a result, now is the right time to capitalise on boosting manufacturing further by taking action to strengthen the UK’s supply chains across industry. This will help unlock further growth and increase exports.”

Nevertheless, the results will boost confidence in the UK economy's ability to export its way to health as export order books rallied to a level well above the long run average, driven by particularly strong results from the mechanical engineering, electronics and motor vehicle industries.

The survey of 514 manufacturers found output volumes also continued to rise at a similarly solid pace to that seen in the past three months, with expectations of stronger growth for the coming quarter.

Euro strengthens further

The British pound to euro exchange rate (GBP/EUR) has meanwhile come under selling pressure after a very decent rally.

The ascent of the euro comes amidst a void of Eurozone data meaning that the movements in euro rates occurred largely as a result of events elsewhere.

"The release of the Monetary Policy Committee minutes meant the single currency fared better against sterling, and there was strength against the US Dollar thanks to speculation ahead of the Federal Open Market Committee (FOMC) interest rate decision," says Carl Hasty at Smart Currency Business.

Nevertheless, the day’s positive movements in the euro complex mark a departure from the more recent general trends, and as such were limited.

Today’s Eurogroup meetings, which will be attended by European Central Bank (ECB) President Mario Draghi and Finance Ministers from across the eighteen-nation bloc, may play a role in determining whether the euro can continue to strengthen against its major trading partners.

US dollar fails to find support from the US Fed

The big event of the week, from the dollar exchange rate complex's perspective was the release of the June FOMC minutes.

The Chair of the Federal Reserve spoke at the release of the minutes and the US dollar weakened across the board as the rhetoric was more positive about the US economy than expected.

This increasing risk appetite and undermining the US dollar given its safe haven status.

Dollar bulls wanted to hear that the US Fed would bring forward their plans on tapering the quantitative easing programme and perhaps signal an earlier interest rate than is currently being predicted.

They were ultimately disappointed as the message was one of no change.