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Single currency makes recovery on ECB bond buying promise

Pound: The start of the week has been kind to the pound despite threats of another cut to UK growth and worry-ing signals the UK economy is struggling to cope in the wake of the global debt crises. Cable finished off the week at a low of $1.6227 Friday, but then came the news of a downgrade of US debt which sent the dollar spi-ralling down. The pound managed to gain over two cents on this news as the dollar was sold off across the board. We saw the pound hit $1.6440 in this mornings trading session and triggers have been hit out as clients who placed limit orders in case of a fall in the dollars value were rewarded. VFX clients placed limit order via access to their online payments platform which can be requested free of charge via email or phone (telephone placed limit orders are also available). The pounds position against the euro has come under some pressure after last weeks gains for sterling were eroded in the wake of the US downgrade and news the ECB will actively be buying Spanish and Italian bonds. Fridays high of 1.1565 has now fallen to 1.1442. Clients should not get to complacent in the pounds rally against the dollar, as this week the Bank of England is set to slash its forecast for the UK economy once more and signal that interest rates are going nowhere in an attempt to safeguard the fragile recovery in the wake of the continued shock to global markets following America's credit downgrade.
No major data.


Euro: Sellers of euros can breath a sigh of relief this morning after the ECB announced on Sunday it is to ac-tively buy bonds to fight eurozone debt crises, signalling it could start buying Spanish and Italian government bonds. The central bank welcomed new deficit reduction measures and economic reforms by Italy and Spain as well as a Franco-German pledge that the eurozones rescue fund will take responsibility for bond-buying once it is operational, probably in October. This gave the euro some confidence in the market after the last few weeks of turmoil, where global players targeted the single currency and sent it spiralling down against the other majors. The euro recovered against the pound and also saw a whopping four cents put on the dollar, as the downgrade of us debt also helped the euros value.  Data: 09.30: Sentix Investor Confidence 3.6 from 5.3.


After all the last minute compromises and a deal being reached with only 12 hours to go for the US to raise its debt ceiling last Tuesday, it didn't stop one of the big three credit rating agencies from doing what most Ameri-cans thought was unthinkable; the first time in US history that they have been downgraded, losing their coveted AAA+ credit rating, dropping it a notch to AA+. S + P made good their promise and added to concern the fiscal health of the worlds biggest economy is slipping. The greenback weakened against the euro before the Federal Reserve meets tomorrow on monetary policy after S + P cut the US one level. The dollar has given up a huge four cents versus the euro as the $1.44 handle was targeted. Against the pound there was also a big slide as two cents was lost to push cable back over the $1.64 handle.
No major data.


• A Japanese Finance Ministry official said the government is ready to sell yen again following last weeks move if it seems speculative trades driving the currency higher. We have already seen USD/JPY fall back below the 78.00 handle this morning which came after the downgrade of US debt by S + P.
• All day we have the G20 meetings attended by finance ministers and central bankers.


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GBP/USD                        1.6429

GBP/EUR                        1.1435

EUR/USD                        1.4357

GBP/JPY                         127.92

GBP/AUD                        1.5350

GBP/NZD                         1.9207

GBP/ZAR                         11.3549

GBP/CHF                         1.2513

GBP/CAD                        1.6108

GBP/SGD                        1.9944

GBP/THB                         48.90

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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