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GBP/EUR trades higher despite Ernst & Young lowering GDP forecast

The pound’s performance is a mixed picture as we start the new week with cable little changed but GBP/EUR having posted nearly a 1 cent gain in sterling's favour. The euro has been battered since the end of last week and this gave sterling a get out of jail free card as we managed to move from 1.1370 on Friday to trade around 1.1470 in early morning UK trade. Investors have sold their euro holdings and this has benefitted the pound’s position despite a forecaster saying UK GDP will be lower. Uncertainty among British consumers and ailing business confidence in the face of the eurozone debt rises will hit UK growth this year, Ernst & Young has warned. The lower forecasts come ahead of the publication this Wednesday of minutes from the Bank of Eng¬land's latest Monetary Policy Committee meeting and will strengthen views that a rise in interest rates remains some way off. The report also forecasts that house prices would continue to fall “well into next year”, down 6% from their 2010 peaks. Despite the gloomy outlook, Ernst & Young’s Item club said the long-term prognosis was more upbeat for business. Corporate balance sheets are healthy and exports should pick up again quite quickly once current uncertainties in Europe are resolved.
No major data.   


The euro fell to a seven week low against sterling, the most in a week against the dollar and slid to a record versus the Swiss franc on concern European leaders will fail to agree on measures to contain the regions debt crises at a meeting summit this week. The 17 nation currency dropped for the first time in four days versus the yen after European Central Bank President Jean-Claude Trichet reiterated his opposition to any restructuring of Greek debt. The single currency dropped to 0.8718 which was its lowest since the end of May. Euro leaders will meet in Brussels on July 21st to discuss the “financial stability” of the region. The second summit in a month follows a worsening of the crises that pushed Italy to the attention of investors and drove bond yields to euro-area records across Europe's most debt laden nations. The euro even fell after the European Banking Authority said that only 8 of the 90 banks failed its stress tests.
No major data but.


The dollar saw similar moves as sterling over the weekend as it to made gains on the under-pressure euro but traded sideways on sterling. The dollar index gained amid optimism US positions will be able to reach an agree¬ment on increasing the governments $14.3 trillion debt ceiling. The dollar index, which tracks the US currency against those of six major trading partners rose 0.4% to 75.434. Confidence the US will avoid default has kept the 10 year treasury yield near record lows. Overnight we saw a decline in Asian stocks  which boosted demand for safer assets. This also saw the dollar rise as it benefitted from a decline is risk appetite.  .
Data 13.30: Trade Balance –44.1B from –43.7B. 19.00: FOMC Meeting Minutes.


• Australia and New Zealand’s dollars fell on speculation European leaders will fail to agree on measures to resolve the regions debt crises at this weeks summit.


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GBP/USD                        1.6105

GBP/EUR                        1.1481

EUR/USD                        1.4024

GBP/JPY                         127.14

GBP/AUD                        1.5201

GBP/NZD                         1.9105

GBP/ZAR                         11.1946

GBP/CHF                         1.3125

GBP/CAD                        1.5450

GBP/SGD                        1.9638

GBP/THB                         48.41

GBP/HKD                        12.5537

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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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