Foreign Currency Exchange

The UK currency remained generally weak on Friday. The sharp drop in equity prices undermined risk appetite and damaged confidence in the economy which undermined Sterling, especially with persistent fears over UK conditions.

There were no UK data releases during the day, but underlying confidence in the economy remained at a very low level, especially with political stresses still an important element. The growth and inflation data will be watched closely this week for further evidence on conditions. Sterling settled around 1.2250 against the Euro, just above fresh lows. Risk appetite recovered on Monday following the US Government bailout and this pushed Sterling stronger as there was an improvement in risk appetite. The UK currency recovered to 1.77 against the dollar, but failed to hold the best levels against the Euro as more negative housing news from Nationwide continues to weigh on Sterling.