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Yen rises against peers on refuge demand amid US + Europe debt crises

Pound: A move higher versus the euro saw sterling take three quarters of a cent off the euro yesterday as the pound benefitted from the debt crises which has besieged the single currency over the last 12 months seem to worsen. Another downgrade for Greece and a possible fourth country to be dragged into the sovereign debt crises saw investors sell the single unit to the benefit of other currencies. However, it was not all good news for the pound if you were a buyer of dollars. The huge implications of the US not solving their own crises in the form of a possible debt default has spooked markets and led to safe haven currencies reaping the reward. Cable shed a whole cent as we dropped from $1.6434 to $1.6324 as risk aversion spread through currency markets. As if that wasn’t enough, UK factory orders came in much worse than expected and optimism plunged to the lowest in two years. The expected figure was –2, but we saw a figure of –10 printed and the reason why the data is highly regarded—it’s a leading indicator of economic health! Data 11.00: CBI Realised Sales 1 from –2


Euro: The euro weakened for a second day against the dollar and yen with even a fall versus the pound on speculation the regions sovereign debt crises will keep spreading. Fears of a recession in Italy and the Germans reluctance to back the EU’s bail-out fund with real muscle have set off fresh eurozone tremors. The euro started to feel the heat again after S+ P followed Moody’s downgrade of Greece, followed by Cyprus feeling the heat as S + P took two notches moving Cyprus from A2 to Baa1. The darkening picture in Cyprus raises concerns that a fourth eurozone country might soon need some sort of rescue, exhausting bailout tolerance in Germany, Hol¬land, Finland and Slovakia. It looks like the markets have started to see flaws in the summit deal. German fi¬nance minister Wolfgang Schauble has also told key Christian Democrats that there will be “no blank cheque” fro EFSF operations and cautioned against thinking “the crises of trust in the euro area can be conclusively ended by a single summit”. Traders interpreted this as a strong signal Germany could not be depended upon for standing by the euro indefinitely. The immediate crises in Europe may have passed, but it hasn't fixed underly¬ing problems, and that is why the market has been less than excited about holding euros. Data: 08.55: German Unemployment data –15k from –8k.


Dollar: Gains for the buck against the euro and pound were posted yesterday as risk aversion firmly gripped the markets and safe haven currencies were sought out. Stock markets across the world tumbled and gold hit fresh highs as leaders in Washington failed to halt America’s slide towards default. Even though the yen and Swiss franc rose versus the dollar, the greenback to an extent benefitted from scared punters as they bought the dol¬lar. President Obama as well as the Republican House of Representatives and the Democratic Senate, are run¬ning out of time to agree to lift the country’s $14,3 trillion debt ceiling. The US Treasury has said that it won’t be able to pay all its bills by next Tuesday, raising the spectre of the country’ first major default in its history. US data also disappointed as the central banks Beige Book survey of US regional economies showed 8 out of 12 have seen the pace of expansion slow in recent weeks. Data 13.30: Unemployment Claims 413k from 418k. 15.00: Pending Home Sales m/m –1.5% from 8.2%.


• The yen gained against most of its major counterparts as concern that the US and Europe will struggle to contain their debt burdens spurred demand for Japan’s currency as a refuge.
• Gold touched new high of $1,630 per troy ounce and stocks dive on risk aversion


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GBP/USD                        1.6347

GBP/EUR                        1.1361

EUR/USD                        1.4385

GBP/JPY                         126.92

GBP/AUD                        1.4765

GBP/NZD                         1.8663

GBP/ZAR                         10.8465

GBP/CHF                         1.3090

GBP/CAD                        1.5480

GBP/SGD                        1.9652

GBP/THB                         48.52

GBP/HKD                        12.7396

red-down; blue-up (snap shot)

These rates are for indication purposes only.




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John Paul Georgiou

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