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Euro continues to find itself under pressure from majors

Pound: For those of us who have watched the trading pattern for GBP/EUR this week, could be forgiven for feeling a little confused this morning as to why we saw the pound fall against the euro earlier in the week and rally right before an imminent interest rate rise by the ECB—typically a sign for that currency to strengthen. The Greek bailout over the last few weeks has given the euro some support and hence seen sterling fall. There has also been the view that the interest rate moves expected by markets today have also been already factored into current exchange rates. So despite the view that the BoE are looking to hold rates today and the ECB may look to hike, the pound has gained over a cent and a half on its European cousin after Portugal's credit rating got slashed to junk status and markets turn on other European countries. Cable has been a complete reversal as we saw the pound take a dive south as GBP/USD broke through the $1.60 handle. Market jitters which have increased on the back of the Greek debt problem’s potential to spread to a wider audience has led to players parking their funds in slightly safer havens, fuelling the dollar and Swiss franc, leading to the pound to be lower against such safe haven currencies. Bank of England’s Governor Mervyn King’s monetary policy may diverge further from the rest of Europe today as officials keep record-low interest rates to aid the recovery and guard against threats from the Greek crises. The BoE will hold the benchmark rate at 0.5% according to all 51 econo¬mists in a Bloomberg News Survey. Data 09.30: Manufacturing Production m/m 1.1% from –1.5%. 12.00: Bank Rate 0.50% unchanged & Asset Purchase facility unchanged at 200B.     
Euro: The euro remains under pressure this morning after another day of selling pressure saw the single cur-rency decline across the board. The euro gave up 1% versus the pound, traded near the lowest level in a week versus the Swiss franc and is currently testing the $1.43 handle on the dollar. The news story hitting the wires at present is focusing on analysts saying Ireland’s credit rating may be cut to junk by Moody’s following Portugal's loss of its investment grade rating. Contagion seems to be creeping in again with dangerous ripple effects across southern Europe, which will continue to weigh on the euro. To see just how worried the markets got yes¬terday, yields on Irish two-year bonds surged above 15% for the first time. Italian borrowing costs reached levels not seen since the aftermath of the Lehman crises in late 2008. Yields on Spain's 10 year bonds jumped 12 basis points to 5.59%. All this has put pressure on the euro, despite the view that the ECB are about to raise interest rates later today, which normally would see that currency rally. It seems the market has already priced this rise in. Data 11.00: German Industrial Production 0.7% from –0.6%. 12.45: Bank Rate 1.50% from 1.25%. 13.30: ECB Press Conference.

Dollar: Renewed jitters chilled the torrid summer rally on global bourses and saw a continued rally in the dollar. The FTSE 100 slipped 21 points to 6002 while Milan fell 2.4%. Worries over contagion on European countries inability to handle their spiralling debt levels has seen risk come off the market to the benefit of the US dollar. This was despite gloomy economic data coming out of the states, and a weak jobs report predicted tomorrow. Data yesterday saw the services industries in the US expand at a slower pace in June, a sign the economy cooled at the end of the first half of 2011. But at present, the fear of debt contagion in Europe is worrying inves¬tors more and so the dollar remains bid. Data 13.30: Unemployment Claims 421k from 428k

• New Zealand dollar erases its gains versus the greenback after a survey indicated a 7.8 earthquake off the Kermadoc Islands.


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GBP/USD                        1.5992

GBP/EUR                        1.1190

EUR/USD                        1.4290

GBP/JPY                         129.43

GBP/AUD                        1.4904

GBP/NZD                         1.9326

GBP/ZAR                         10.7445

GBP/CHF                         1.3411

GBP/CAD                        1.5433

GBP/SGD                        1.9601

GBP/THB                         48.48

GBP/HKD                        12.4437

red-down; blue-up (snap shot)

 These rates are for indication purposes only.


For more information or to get the latest spot rates contact:

John Paul Georgiou

Senior Foreign Exchange Broker

+44 (0) 20 7959 6917


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