Friday, 3 December 2010

Pound falls against Euro, outlook for further declines

3rd December 2010
Good morning. Sterling fell versus the Euro yesterday, as traders cited the ECB buying Portuguese and Irish debt, helping to calm jitters over the euro zone periphery and lend support the ailing single currency. This has reversed the recent trend and rates are now falling. At 08:30am rates stand as follows:

  • GBP/EUR 1.1818
  • GBP/USD 1.5640
  • GBP/AUD 1.5951
  • GBP/NZD 2.0636
  • GBP/CAD 1.5662
  • GBP/CHF 1.5496
  • GBP/NOK 9.4801
  • GBP/JPY 130.69
  • GBP/ZAR 10.830
  • EUR/USD 1.3226

Euro gains strength pushing GBP/EUR rates down

"The ECB have reportedly been buying Portuguese debt and the spreads have come in, which is why the euro has rallied against sterling and other currencies," said Adrian Schmidt, currency strategist at Lloyds Banking Group.

There was talk in the markets that the ECB might be buying up troubled countries' bonds on the quiet, despite no confirmation of this action from Mr Trichet. Accordingly, both Irish and Portuguese 10-year bonds rose.

Philip Shaw, an economist at Investec, attributed the euro's recovery partly to the talk of the Portuguese bond purchases, and also to good news on the US housing market.

So, after weeks of GBP/EUR rates climbing due to the problems in the EU, the markets are now calmer and focus could shift to UK economic figures.

Today's Data

We end the week with some Housing data for the UK. From Europe today we have German Retail Sales and some more inflation figures from the EU. From the US we have Non-farm payrolls that measures how many people are employed outside the agricultural sector (as this is seasonal). These are notoriously difficult to forecast, and so the numbers are often very different than expected and so can cause GBP/USD rates to change dramatically.

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