Euro Pound Exchange Rate Report – 15th February 2010
February 15, 2010 Leave a comment
15th February 2010
The single currency struggled to make any gains over a generally weak Pound last week as news from Greece continued to grab the headlines. The Greek economy, which has struggled since the recent downgrade in its sovereign credit rating, has now began to have a major affect across the entire Euro zone as fears of its high debt levels loom. With other countries such as Portugal, Spain, Italy and Ireland also in high levels of debt, small cracks have begun to show in the Euro for the first time since its introduction. The outcome for Greece now suggests a bailout from a larger EU nation such as Germany or an exit from the Euro all together.
By Wednesday investors looked towards the UK as the Bank of England unveiled a conservative report in which the UK inflation outlook was revised down, increasing the possibility of further quantitative easing. The QE scheme which in simplistic terms involves pumping more money into the UK economy is more than likely to weaken the Pound and drive down GBP/EUR rates. BoE Governor Mervyn King said it was far too soon to say QE was finished, leading analysts to believe concerns over the UK economy would continue to hamper sentiment towards Sterling in the longer-term. As a result Thursday’s rate saw a 3 week high in favour of Euro and highlighted the fragility of the Pound.
However, any minor gains were short lived as all attention turned back towards the Euro zone and the lack of detail over the problems facing the Greek economy. Consequently GBP/EUR moved steadily back towards the 1.15 barrier only to break through by Friday lunchtime as news filtered through that a bailout would have to wait. German Chancellor Angela Merkel stated that any bailout procedure would not be exercised until March time at the earliest. As a result GBP/EUR peaked to 1.1517.
With both currencies weak and the market particularly volatile it may be worth discussing the possibility of a forward contract with your Currency Broker. This will allow you to lock in to a rate for up to two years in advance and safeguard you from any losses. Finally, with only a 0.3% difference in debt levels between the UK and Greece, widespread speculation has began hinting that the UK could find itself in a similar situation, suggesting it may be important for those purchasing Euros not to become complacent with the recent turn in GBP/EUR rates.
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