Thursday 15th December 2011
Good morning. Investors continued to shun the Euro yesterday, weakening it further pushing GBP/EUR rates to a 10 month high, best since February. Sterling remained largely driven by negative sentiment towards the euro, leaving the Pound vulnerable as it fell to two-month lows versus the US Dollar. Later in the day, GBP/EUR rates fell back away, and the charts below show how exchange rates fared yesterday.
~Currency movements on Wednesday 14/12/11~
Pound vs Euro hits 10 month high
As the charts above show, the Euro weakened yet again yesterday and pushed the exchange rate up to a 10 month high. The euro was pressured as Italy had to accept higher borrowing costs, and the currency markets are also pricing in possible downgrades of euro zone countries after last week's European Union summit offered no hope of an immediate resolution to the debt crisis.
This weakened the Euro making it even cheaper to buy, and this is the reason for the gains. Later in the afternoon rates fell back away slightly but remain supported at very good buying levels.
The fact remains that the Pounds gains are really just a reflection of euro zone debt worries rather than any particular strength for Sterling. Also the EU veto by Cameron last week could be negative for the pound in the longer term. The key to whether rates will rise further will be whether the Bank of England opt for any more Quantitative Easing.
You can read more about yesterdays decline in Pound/Euro rates in, of all places, the Daily Mail. (apologies, it's not the type of newspaper I would normally link to!)
Sterling falls against the US Dollar
As the charts above show, Pound/Dollar rates fell yesterday. Same reason as usual! Euro weakness causing Dollar strength, making it more expensive to buy.
Pound rises against Australian Dollar
Sterling made good gains against the Aussie yesterday, and the Pound gathered strength in the light of the EU debt problems. Despite the UK economy suffering, it's seen as a safer bet than the Euro, helping push rates up. Rates gained by 1% yesterday.
A very busy day for the UK and EU. Starting in Europe, we have German Inflation data, and EU wide inflation data. There is also a monthly report from the ECB that could affect the Euros value. We then see further EU inflation numbers and unemployment data. On to the UK, there are Retail Sales to watch for in addition to Construction data. Stateside, Jobless measures and inflation data will be watched closely.
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