Broker's Notes: Sterling in sharp rise as economic data shows weakness

Sterling rose sharply against a broadly weaker dollar on Friday but hit a four-month low against the euro and a currency basket, pressured by the possibility of more monetary easing in the UK. Data on Friday showed activity in Britain's manufacturing sector weakened more than expected in September, growing at its slowest pace in 10 months as export orders fell for the first time in more than a year. The figures are likely to reinforce concerns that Britain's recovery is faltering after strong growth in the second quarter, and could lend weight to Bank of England policymaker Adam Posen's call for more stimulus.

Euro

The euro rose to a two-month high against the yen and a four-month peak versus sterling on Friday as the single currency gained across the board. The euro rose to 114.32 yen its highest since late July. It also touched a four-month high against sterling of 86.87 pence. Earlier, the single currency rose to a 6-month peak against the dollar above $1.37.

Gold

Gold ticked up on Friday, hovering within sight of a lifetime high, but a steadier euro could curb gains after improving U.S. and China data suggested growing global economic strength. Silver held near a 30-year high and platinum rose to a four-month high, while industrial demand helped sister metal palladium. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings eased to 1,304.776 tonnes by Sept 30 from 1,305.688 tonnes on Sept 28. The holdings hit a record at 1,320.436 tonnes on June 29.

Rupee

Indian rupee rallied to five-month highs on Friday, powered by hopes for sustained foreign portfolio investments and a wobbly dollar overseas. Rupee gained 0.5 percent on the day, adding to a 3.4 percent rally in the September quarter when foreigners moved more than $11 billion into Indian stocks, chasing potentially better returns in the fast-expanding economy. India's current account deficit widened in the June quarter from the previous three months due to higher merchandise trade gap and lower earnings through services, roughly in line with market expectations.

Oil

Oil rose on Friday to $81, a seven-week high, boosted by stronger-than-expected U.S. and Chinese economic data which raised hopes of demand recovery in the world's largest consumers. China's manufacturing sector gathered momentum last month, the official purchasing managers index (PMI) showed, providing further evidence that an important engine of global growth is humming again after sputtering in the second quarter. The market will be watching out for the Institute for Supply Management US September manufacturing index, due later on Friday. Economists expect a reading of 54.5 versus 56.3 in August. The International Energy Agency, which advises industrialised nations on energy policy, said on Friday it sees upward pressure on oil prices in the second half of 2011 due to a projected decline in oil stocks.

Source: Richcomm Global Services DMCC, Dubai