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Huge volatility in financial markets continue to rally safe haven currencies

Pound Sterling found itself under pressure yesterday in one of the most volatile days in financial markets for quite some time. Pressure from all sides came in the form of risk aversion as the US economy falters, eurozone weakness with France becomes the latest country to feel the wrath of global pressures and a downbeat BoE inflation report all led to the pound giving up recent gains made against the majors. As expected the Bank of England cut its 2011 growth forecast for the UK to about 1.5% from 1.8%, because the global economy is facing “persistent headwinds”. Bank Governor Mervyn King said the economy had weakened, in large part due to the debt crises in Europe. He also said inflation would continue rising through the autumn before falling back next year. The general consensus also seems that interest rates will remain low for quite some time, keeping the UK currency lower to help with export growth. The pound gave up over two cents from yesterday as flows into the dollar increased as risk aversion gained momentum with cable falling from $1.6322 to test the $1.61 handle. Against the euro we also saw a fall in value as GBP/EUR dropped to the 1.1250 level. There was some support for this currency pair later in the day however as the financial markets turned on Frances AAA+ credit rating which saw the euro sold off in afternoon trade. It looks like this week, and even this month will remain volatile as summer months generally do see bigger than normal swings in prices, so clients may want to use Limit Orders to try to take advantage of big swings and market movements: email or call VFX for further information.  
Data 10.00: CB Leading Index. 13.00: Chancellor Osborne Speaks.


Euro: Not the best day for the euro as France became the latest country to feel the wrath of global market jitters and worries regarding Frances coveted triple a credit rating sent markets in a spin and the euro lower across the board. French President Nicolas Sarkozy gave his finance and budget ministers a week to devise new meas¬ures to cut Frances budget deficit as shares in the country's banks plummeted in the latest bout of financial mar¬ket turmoil. This came as rumours circulated about French banks and the possibility of a French credit rating downgrade, with Societe Generale plunging by as much as 23%. The euro was sold off against both sterling and the dollar as players parked funds in safer havens. All three main rating agencies have reiterated that Fran¬ces triple A rating is stable. No major data.


Traders return to their desks this morning probably thinking what on earth can today bring which they didn't wit¬ness yesterday after one of the most volatile days since the credit crises of 2008. It was hoped calm would be restored in financial markets yesterday after the US tried to install some stability after the Feds meeting Tues¬day, which looked the case in the morning European session, but as the day unfolded, global markets swung one way then the other as global stocks went into melt down and safe haven currencies again made gains. The dollar rallied versus sterling and the euro, but again gave up even more ground on the even safer haven curren¬cies such as the Swiss franc and Japanese yen. The Dow Jones ended down –4.62%.
Data 13.30: Trade Balance –47.9B from –50.2B & Unemployment Claims 401k from 400k..


• The Aussie dollar gave up ground versus most of its peers as a report showed Australia’s jobless rate increased by the most since October. Speculation of an interest rate cut soon by the RBA also kept the currency pegged back .
• Gold cleared $1,800 per troy ounce after the rumour on France losing its triple A credit rating spooked markets.


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GBP/USD                        1.6180

GBP/EUR                        1.1350

EUR/USD                        1.4244

GBP/JPY                         123.89

GBP/AUD                        1.5750

GBP/NZD                         1.9730

GBP/ZAR                         11.6049

GBP/CHF                         1.1870

GBP/CAD                        1.5984

GBP/SGD                        1.9637

GBP/THB                         48.35

GBP/HKD                        12.7563

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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