Pound / Euro falls
08:30am 13th August 2009 – The Euro has strengthened this morning following the Germany GDP figures. Gross Domestic Product is a measure of the total value of all goods and services produced by Germany. The GDP is considered as a broad measure of the German economic activity and health.
The figures were slightly better than forecast, and as Germany is the biggest economy in the EU, the Euro has strengthened. Rates as at 08:30am 13th August 2009 are as follows:
- GBPEUR 1.1612
- GBPUSD 1.6554
- GBPNZD 2.4474
- GBPAUD 1.9720
- GBPJPY 159.22
- GBPZAR 13.238
We also saw Sterling weakness yesterday, following the Bank of England Quarterly inflation report. The pound hit a 2 week low versus the dollar as the Bank of England’s forecast that inflation would remain well below target cooled speculation of an early interest rate hike. Also we saw UK unemployment rise.
The central bank said it was “more likely than not” that inflation would fall below 1 percent in autumn, suggesting that markets are pricing in rate hikes too early. UK rates are currently at a record low 0.5 percent.
“To some extent, the BoE was dovish in that they talked about the potential for inflation to go below 1 percent,” said Lauren Rosborough, senior currency strategist at Westpac in London.
“So they were dovish, yes, but no more than what Speaking to reporters after the report’s release, BoE Governor Mervyn King acknowledged the pound’s tumble from above $2.10 just over a year ago by saying that a weak currency would have some impact on rebalancing the economy, but his comments had little sway on sterling.
I believe that we’re now near the bottom of GBPEUR, as we’ve had all the bad news possible from the UK – look however for positive figures from the EU this morning, as better than expected results may show a further slight drop, but I think we have support at around 1.16. Against the USD however, we could see further drops.
Sterling may have more room to fall versus the dollar in the near term if the U.S. central bank does not extend its quantitat