Euro Pound Exchange Rate Report – 6th December 2010
December 7, 2010 Leave a comment
Watching the Euro/Pound pair this past week has been like watching the Oxford/Cambridge boat race, that is “head to head”.
The week started relatively unspectacularly as the focus remained on the debt crisis in the Euro-Zone with particular attention on Ireland and Portugal and the stance that the ECB would take.
We saw Sterling exchange rates gain momentum against the Euro in trading on Tuesday and Wednesday seeing highs on both days and flirting with 1.1985 on Wednesday, a price not seen since the late September and the then Euro sell-off and subsequent decline. Sterling gained support from defensive inflows as investors saw Sterling as a safer option on the back of positive news from independent analysis of the UK budget deficit and good PMI figures in construction on Wednesday, albeit the UK economic calendar being notably light.
Sterling strength evaporated on Thursday in a choppy trading session as the focus shifted to the imminent ECB decision, the fact that the Euro had not been oversold and doubts remained over the UK recovery on the back of Nationwide showing a slowdown and subdued housing market, which weighs on prices. Furthermore, consumer confidence is relatively weak and private sector debt high. This accompanied with tax rises from 2011 and concerns over debt in the banking sector is adding to market uncertainty.
Friday’s session started with the Euro looking bullish due in a range-bound early session propped up by the news that the ECB kept their main refinancing rate at 1% and that any exit rates should be put on hold for the short-term. Euro buying was put down to ECB demand which gave strength to the opinion that due to the overarching political pressure the ECB would offer unlimited liquidity to respective central banks.
Our currency broker thinks that further defensive buying of Sterling may occur as fears abound that European Central banks may become addicted to the generous ECB offered liquidity. It is believed that the ECB stance has already been factored in to prices in which case it may be the time to bring those Euros home.
To ensure the best rate for Euros it’s worth contacting our currency broker to discuss your options at fixing prices now for future delivery to mitigate ongoing and protracted volatility. The view of the UK economy is still opaque and the jury is out over Sterling’s relative strength to the underpinned Euro as fears over the UK recovery, QE, and tax rises still loom large.
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