Thursday, 10 March 2011

Spain downgrade causes GBP/EUR to rise

10th March 2011
Good morning. Sterling rose slightly yesterday on better Trade balance data, and the Euro is also slightly weaker this morning due to Spain's credit rating has been downgraded. At 08:30am this morning rates are as follows:
  • GBP/EUR 1.1670
  • GBP/USD 1.6126
  • GBP/AUD 1.6063
  • GBP/NZD 2.1938
  • GBP/CAD 1.5630
  • GBP/CHF 1.5025
  • GBP/ZAR 11.097
  • GBP/JPY 133.42
  • GBP/HUF 318.26
  • GBP/NOK 9.0234
  • EUR/USD 1.3817

Sterling gains, interest rate decision today

Yesterday better than expected Trade balance data helped push the pound slightly higher. Today is quite important for Sterling as we have various data releases and an interest rate decision.

Economists expect the MPC to keep interest rates at a record low 0.5 % although the debate within the 9 member MPC could be particularly lively as divisions have been growing on when the BoE should raise rates.

Also today, a UK GDP estimate could cause significant volatility for Sterling this morning. We also have UK industrial production, manufacturing production released at 09:30am.

Sterling has climbed since the start of the year on growing speculation the central bank may raise rates by mid-year to tame inflation pressures, but there is still uncertainty about the timing given a still fragile economic recovery.

Euro weakens following downgrade

Spain has had it's credit rating downgraded, highlighting that fragile EU economy. Moody's downgraded Spain to Aa2 from Aa1 with a negative outlook and warned of further cuts, saying the country's plans to clean up the battered banking sector will cost more than the government expects and add to its debt burden.

Speculation that euro zone interest rates may rise in April could support the single currency in the near term, but concerns about the impact of tighter monetary policy on weak euro zone countries will probably limit gains.

US Dollar

The Euros fall has helped push the US Dollar slightly higher, as investors return to the safe haven US Currency. As we've said in other reports this week, oil prices have also had an effect on the USD due to the volume of it's imports.

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