Wednesday 2nd November 2011
Good morning. Sterling rose to a 1 month high against the Euro yesterday after Greece’s decision to hold a referendum on an EU bailout. This highlighted concerns that the debt crisis is far from over and weakened the Euro. This also pushed investors towards the relative safety of the US Dollar which strengthened causing GBP/USD rates to drop. At 08:30am this morning rates are as follows:
• GBP/EUR 1.1618
• GBP/USD 1.6010
• GBP/AUD 1.5376
• GBP/NZD 2.0073
• GBP/CHF 1.4135
• GBP/CAD 1.6244
• GBP/ZAR 12.782
• GBP/JPY 124.97
• GBP/DKK 8.6430
• GBP/NOK 9.0200
• EUR/USD 1.3776
Sterling hits 1 month high vs Euro
Only a week ago there seemed to be a resolution to the debt crisis when EU leaders voted through measures to help Greece. This had strengthened the Euro and pushed GBP/EUR rates down in the low 1.13’s. However it now seems that the prospect of a swift end to the euro zone’s debt crisis is not as secure as first thought, after the Greek Prime Minister called a referendum on the latest bailout package, drawing calls from within his own party to step down.
This caused the Euro to weaken again, highlighting how volatile the currency markets are to any bad news. The euro fell against sterling pushing rates to their highest in nearly a month.
Against the US Dollar however, the bad news from the EU pushed investors back to the safe haven US Dollar, strengthening it and making it more expensive to purchase. Also adding momentum to the pound’s slide against the dollar was an unexpected contraction in UK manufacturing activity. This has drawn attention to concerns about the economic outlook despite slightly better GDP figures yesterday. This weakened the Pound slightly.
The UK economy may be on the brink of recession according to data showing manufacturing contracted at its fastest pace in more than two years. There are further PMI figures today and if the are also weak, this will likely weaken Sterling further.
Today we see the minutes from the US decision to hold interest rates. Staying in the states we also see mortgage applications, employment data, and at 16:30 there is an interest rate decision. There is little UK data today other than PMI construction. There is a lot to watch out for from the Eurozone: German unemployment in addition to German and EU inflation data.
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