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Greek default still a Euro concern

Sterling fell to eighth month lows versus the dollar yesterday, hit by concerns over the impact of the euro zone’s debt crisis on UK growth and British banks, which could force the Bank of England into more monetary stimulus. Mounting worries over the euro zone’s debt problems kept investors wary of riskier currencies, with the dollar benefitting from a flight to quality and holding close to near seven month highs against a basket of currencies. The pound briefly fell to $1.5706 in European dealing, its lowest level since mid-January. Traders said it had found support around the October 2009 lows of $1.5708, with the October 2010 low of $1.5650 likely to be the stronger cushion. The euro zone’s debt crisis is placing its banking sector under severe strain. Rating agency Moody’s cut the credit ratings of France’s Credit Agricole SA and Soceite Generale on Wednesday, and places another drag on the UK through its exposure to euro zone banks.
Data: 09.30: Retail Sales m/m


The euro declined against the dollar on concern that the risk of a Greek default is increasing borrowing costs for other European countries. The single currency weakened against the yen before Spain and France offer government securities today. Spain will today sell as much as 4 billion euros of bonds maturing in 2019 and 2020. France will offer securities maturing in 2013, 2014 and 2016 and is preparing to auction inflation-linked bonds due in 2019 and 2022. The ECB has also cut its 2011 growth forecast to 1.6 percent from 1.9 percent, and for 2012 to 1.3 percent from 1.7 percent at this months meeting. Earlier this month policy makers left the main refinancing rate unchanged at 1.5 percent, having already raised it twice by 0.25 percentage point this year. Having said that the euro actually regained some of its losses earlier in the week to currency trade at around 1.1470.   
Data: 19.00: ECB President Trichet Speaks.


Volatility remains front and centre, as macro headlines throw risk appetite around, although the overriding theme overnight was one of positivity with EUR/USD reaching a high of $1.3783. Today will bring the week’s largest data barrage as Aug CPI will kick things off. We expect the figures to rise 0.3 percent as the core index sees a 0.1 percent increase, with both indices seeing moderation relative to July’s numbers as inflation pressure appear largely contained. The market sees increase on both the headline and core indices.    
Data 13.30: Core CPI m/m; Unemployment Claims.


• Canada’s dollar fell for the first time in three days, weakening to within one cent of parity with its US counterpart, as oil and copper dropped on speculation a global slowdown will hamper demand for raw materials.


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GBP/USD                        1.5765

GBP/EUR                        1.1460

EUR/USD                        1.3755

GBP/JPY                         120.90

GBP/AUD                        1.5395

GBP/NZD                         1.9320

GBP/ZAR                         11.704

GBP/CHF                         1.3825

GBP/CAD                        1.5645

GBP/SGD                        1.9650

GBP/THB                         47.650

GBP/HKD                        12.291

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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