Sterling, US Dollar and Euro Exchange Rate: The Pound to Euro Exchange Rate has been fluctuating around the 1.200 mark this week

Foreign Exchange Rates Currency News - The Pound to Euro Exchange Rate has been fluctuating around the 1.200 mark this weekThe Eurozone received some positive data releases yesterday with German Purchasing Manager Index Services and Purchasing Manager Index Manufacturing both breaching the crucial 50.0 figure that marks the line between contraction and growth.

by Adam Solomon

Sterling / Euro and US Dollar exchange rates

The bubbling troubles that circulate around the cauldron that is the Eurozone debt crisis are approaching boiling point according to the IMF. The International Monetary Fund has cut its world growth outlook to 3.3% from 4.0%, citing the ‘Euro area economy’ as the primary concern. Eurozone growth has been cut from 1.1% down to a contraction of 0.5% and UK growth has been slashed from 1.6% to 0.6% due to the area entering a ‘perilous new phase.’

The Pound to Euro Exchange Rate has been fluctuating around the 1.200 mark this week, and currently stands at 1.199 (10:42 GMT). The Pound to US Dollar Exchange Rate grew slowly but steadily this week to 1.563, but this morning has seen the cable drop down to 1.558 (10:42 GMT).

The UK economy faltered in Q4 according to the latest release from National Statistics. GDP fell by 0.2% and many believe that we are currently back in recession (a technical recession consists of 2 consecutive quarters of contraction) but of course we won’t know for sure until Q1′s figures are released for 2012.

January’s Bank of England Minutes showed that on January 11th and 12th the Monetary Policy Committee voted unanimously in favour of maintaining the 0.5% interest rate and £275 billion current level of asset purchases. The Minutes showed that regarding future Quantitative Easing measures the jury is still out; with one set of members looking to increase the current asset purchase scheme in the coming months to aid inflation targets, while the other set who have more confidence in inflation are keen to retain the current level.

Greek Crisis talks appeared to be building up momentum at the start of the week but the negotiations fell at the pivotal moment; Eurogroup finance ministers have rejected Greek bondholders’ demands for 4.0% coupons. Banks and other private institutions represented by the Institute of International Finance (IIF) were gunning for a minimum of 4.0% interest on the debt they hold if the nominal value is to be slashed by 50%. Greece, with the backing of the Eurogroup and the International Monetary Fund, has stated that it is not prepared to pay over 3.5% on the coupons.

The conflict of ideas has left the talks at a standstill and increases the chances that the Greek government will pass an involuntary bill that forces bondholders into taking the cuts. This would allow Private Sector Involvement companies to trigger Credit Default Swap payments and could lead to a free-for-all in the Eurozone if the fear of default catches on.

Markets have not reacted in great vigour to the breakdown in the deals and bond auctions have gone surprisingly well this week. In Spain 3-month yields dropped from 1.735% to 1.285% and 6-month paper bills fell from 2.435% to 1.847%. The ever-steady Netherlands who retain their AAA credit rating, sold 30-year debt with yields falling from 4.03% to just 2.69% and €495 million of 2013 bonds with virtually no yield at 0.074%.

The Eurozone received some positive data releases yesterday with German Purchasing Manager Index Services and Purchasing Manager Index Manufacturing both breaching the crucial 50.0 figure that marks the line between contraction and growth. PMIS continued its rise from 52.4 up to 54.5, and PMIM beat estimate growth figures to rise from 48.8 to 50.5.

And German IFO results continued in a similar vein of form this morning, with Business Climate improving from 107.3 to 108.3 and Expectations rising from 98.6 to 100.9. Current Assessment also stands above 100 at 116.3 showing that Germany is continuing to push forward even while some of its Euro empire states appear to be crumbling.

Today’s Exchange Rate Data

EU 09:00 – German IFO – Expectations (January)

UK 09:30 – BoE Minutes (January)

UK 09:30 – GDP Q4 (Q4)

EU 13:15 – ECB President Mario Draghi’s Speech (January)

US 17:30 – Fed Interest Rate Decision (January)

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  3. Pound Sterling, the Euro and US Dollar exchange rate forecast – The Pound declined heavily against the Euro exchange rate last week
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Article source: http://feedproxy.google.com/~r/ForeignExchangeOutlook/~3/nVKIMKbybr4/

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