Why has the pound fallen 21st May 2010?

Good morning. The pound to Euro exchange rate has been very volatile overnight, in unusual big swings when the UK and EU markets were closed. We’ll look at this in a moment. First the usual snapshot of rates as at 08:30am

  • GBP/EUR 1.1488
  • GBP/USD 1.4363
  • GBP/AUD 1.7359
  • GBP/NZD 2.1363
  • GBP/CAD 1.5315
  • GBP/CHF 1.6520
  • GBP/ZAR 11.368
  • GBP/JPY 129.33
  • EUR/USD 1.2502





As you can see from the chart, GBP/EUR rates fell quite dramatically through the night, hitting €1.1398 at the low, before starting to recover slightly this morning. It’s to do with fears that the debt crisis in Europe will spread, and in overnight trading in the Asian markets, there was a big sell off of both Euro and Sterling, as investors flocked to the safe haven US Dollar.

“There’s uncertainty over the extent of the fallout from the crisis, such as whether it would end up leading to a halt in financial trades like after the Lehman shock,” commented Masaru Hamasaki, a senior strategist at Toyota Asset Management.

When things are uncertain, the US Dollar usually benefits, and this has been the case over the last 24 hours. The drop in GBPEUR rates from the €1.16’s down to the €1.13’s in 24 hours is the biggest one day drop since October last year.

What next for the Eurozone debt crisis?
A European Union taskforce of finance ministers is to meet in Brussels later to brainstorm ways to prevent another crisis like that in Greece. There will be changes proposed to EU budget rules to tighten up financial regulation. Read more about this on the bbc site here.

Today’s Data
GDP from Germany will play a part in the Euros value, along with measures of business confidence. Those needing Canadian dollars should also pay attention today, as we have inflation measures and retail sales.

Have a great weekend.

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