Sterling at 6 month high vs the Euro

Tuesday 4th October 2011
Good morning. Why is Pound going up against Euro October 2011? Sterling fell against the US Dollar yesterday, but surges against the weak Euro as it seems Greece will miss it's deficit reduction target increasing the chance of default. This has pushed GBP/EUR exchange rates above 1.17 and we now have the best Euro exchange rates for 6 months. At 08:30am this morning rates are as follows:

GBP/EUR 1.1706
GBP/USD 1.5431
GBP/AUD 1.6278
GBP/NZD 2.0462
GBP/CHF 1.4202
GBP/CAD 1.6285
GBP/ZAR 12.719
GBP/JPY 118.15
GBP/DKK 8.7096
GBP/NOK 9.1357
• EUR/USD 1.3182

Sterling at 6 month high vs the Euro

Yesterday Greece said it would not meet this year's deficit cutting target, sending shares and the single currency lower during trading yesterday. Athens announced that the 2011 deficit was projected to be 8.5% of GDP, down from 10.5% in 2010 but short of the 7.6% target set by the EU and IMF.

The government, which on Sunday adopted its 2012 draft austerity budget, blamed the shortfall on deepening recession. The Euro fell sharply as a result, weakening and becoming cheaper to purchase. We saw GBP/EUR hit a 6 month high, and the Euro was also down 1.4% against the dollar in late trading, and dropping 2% to a decade low of 101 yen against the safe-haven Japanese currency.

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Sterling down against US Dollar

Sterling fell against the dollar on Monday, brushing off better UK manufacturing data, as the pound sold off in line with stock markets and other higher-risk currencies due to mounting worries about a Greek debt default. The worries caused meant the US Dollar gained strength on it's safe haven status, becoming more expensive to purchase.

It's important to remember Sterling is not actually very strong. We expect Quantitative Easing from the Bank of England which could weaken the Pound further. It's only the Greek debt issue that's causing GBP/EUR rates to rise, and we expect these gains to be short lived.

US Senate backs debate on currency law amid yuan row

There's an interesting story about currency pegging and protectionism on the BBC site today. It's not directly related to the main currencies we trade, so rather than delve further into the story here on the blog, you can read about it on the BBC site.

Today's Data

House price data is the only UK release of note. In the EU we have another round of inflation data. There are also Factory order numbers from the USA.

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