Sterling & Euro strengthen on aid package, GBP/EUR down

Friday 22nd July 2011
Good morning. The conclusion from the EU summit yesterday has raised confidence they would solve their debt problems, and both Sterling and the Euro are higher as a result. Sterling has hit a 5 week high vs the US Dollar, but has fallen against the stronger Euro. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1301
• GBP/USD 1.6307
• GBP/AUD 1.5044
• GBP/NZD 1.8897
• GBP/CAD 1.5397
• GBP/ZAR 10.997
• GBP/JPY 128.27
• GBP/DKK 8.4211
• GBP/NOK 8.7812
• EUR/USD 1.4425

Eurozone Aid Package Agreed – Euro strengthens

Details of how Greece will restructure its massive debts have emerged as eurozone leaders agree a package they hope will help resolve the debt crisis. The share prices of banks seen as most exposed to distressed eurozone government debts rose by more than 5%, led by Barclays, which ended the day 7.8% higher. The news also strengthened both the Euro and the Pound, as investors are calmer about investing in riskier currencies.

Meanwhile, the euro stayed near a 2 week high against the dollar, reached as news of the agreement broke. The latest Greek bail-out by the 17 eurozone governments and the International Monetary Fund is part of a comprehensive package to shore up the single currency unveiled on Thursday. Eurozone leaders hailed the comprehensive agreement.

So what next for GBP/EUR exchange rates?

The Euro has pushed higher, knocking GBP/EUR rates down accordingly. Sterling has also strengthened on the news due to the UK’s exposure to Greek debt, but despite the Pound gaining the Euro has become much stronger, and the net result is lower exchange rates to buy Euros.

With the uncertainty over the Eurozone now over, markets will likely focus on fundamental data, and given the UK economy is in a poor state at the moment, we expect further falls for Sterling. It has only been the debt crisis keeping GBP/EUR rates high, and now this is resolved we could see further drops for the currency pair.

Today’s Data

From the Eurozone today we see Industrial orders, showing the health of this sector. We also have confidence measures from Germany, the largest economy in the EU. In Canada we have retail sales and inflation data.

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