Why has Pound fallen against Euro August 2011

Wednesday 10th August 2011

Good morning. Sterling has fallen quite a bit in the last 24 hours, pushed down ahead of today’s Bank of England (BoE) inflation report, that may well present a poor assessment of the UK economy. At 08:30am this morning rates are as follows:

GBP/EUR 1.1312

GBP/USD 1.6254

GBP/AUD 1.5691

GBP/NZD 1.9465

GBP/CAD 1.5964

GBP/ZAR 11.579

GBP/JPY 124.76

GBP/DKK 8.4263

GBP/NOK 8.8614

• EUR/USD 1.4366

Sterling down vs Euro and US Dollar

So why has the Pound fallen against the Euro August 2011? It’s mostly due to today’s BoE inflation report, that is expected to issue a poor assessment of the economy today. This follows data earlier in the week that showed a surprise fall in manufacturing output. This reminded investors of the fragility of the economy as it faces new challenges from global financial turmoil and also the widespread riots in London and other cities.

Today’s BoE report will show it’s latest growth and inflation forecasts today. Markets will be looking for clues to more Quantitative Easing, and it’s this expectation that has hurt the Pound and dragged it down from highs against the Euro seen earlier in the week.

Just a few days ago markets were talking about Sterling being a new safe haven currency, however analysts now realise Sterling’s gains are mostly due to the fact it’s the best of a bad bunch. With issues in the USA and the EU regards debt, the Pound had gained as other currencies lost out.

However, according to Reuters, in the coming weeks sterling could be “well-placed” for more gains given the concerns about debt problems in the United States and its credit ratings downgrade, as well as the debt crisis in the euro zone. Meanwhile rioting and looting across London and in other cities this week also darkened the outlook for sterling as it pointed towards spreading social unrest.

Today’s Data

German inflation figures will be closely watched today, for any hint of a further EU interest rate hike. In the UK we see a confidence report, and there is a Bank of England inflation report, along with a speech by BoE governor Mervyn King. Watch for any comments regards further fiscal stimulus (Quantitative Easing) that may weaken the Pound further.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Leave a Reply

Your email address will not be published. Required fields are marked *