Ireland debt weakens Euro; GBP/EUR €1.18.

12th November 2010
Good morning. Sterling rose yet again vs the Euro yesterday, after problems regarding Ireland’s debt weakened the Euro. Today we have some further key data from Europe, so we could see further changes. At 08:30am this morning rates are as follows:

  • GBP/EUR 1.1770
  • GBP/USD 1.6059
  • GBP/AUD 1.6250
  • GBP/NZD 2.0724
  • GBP/CAD 1.6260
  • GBP/CHF 1.5644
  • GBP/ZAR 11.214
  • GBP/JPY 131.36
  • GBP/NOK 9.580
  • GBP/HUF 325.25
  • EUR/USD 1.3643

Ireland debt weakens Euro

Sterling benefited from growing negative sentiment towards the euro, with investors particularly worried that Ireland and Portugal might need a Greek-style bailout.

The government’s deficit surged during the recession after it was forced to bail out the country’s banking system. The recent rise in the interest rate Irish government bonds pay out, which hit record highs this week, suggest investors doubt whether these cuts will be enough to put the Irish economy, which suffered one the deepest recessions in the eurozone, back on track.

This makes it increasingly likely that the Irish Republic will have to be bailed out by the EU and the International Monetary Fund. As a result, the Euro weakened and GBP/EUR rates rose again, briefly breaking through €1.18 before retreating. It’s fallen back as this morning consumer confidence for the UK came in lower than expected.

G20 agrees to address currencies

Leaders of the G20 group of major economies have agreed to avoid “competitive devaluation” of currencies after a second day of difficult talks in the G20. You can read a detailed report about this on the BBC site here. The news may avert a currency war where economies try to devalue their currencies to boost exports.

Today’s Data

We have GDP data for the Eurozone today, in addition to Industrial Production figures. The GDP figures are important, as it will show if the economy is growing as forecast. We expect the figure to show a quarterly rise of 0.5%, and a year on year rise of 1.9%.

If the figures released at 10am are higher, then expect GBP/EUR rates to fall. If figures are lower however, then we may see further gains. We’ve already seen German GDP this morning that was roughly as expected.

Have a great weekend.

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