The Euro has weakened significantly against the Pound and the U.S Dollar, after the bond auction in Spain led to renewed concern that the region is struggling to overcome the sovereign debt crisis and restore confidence in the outlook.
Sterling / Euro and US Dollar exchange rates
The Pound rallied to the highest level in two-weeks against the Euro, rising through 1.2050, after a report in the UK this morning showed that growth services industries unexpectedly accelerated in March, while house prices increased by more-than-expected. The UK currency is trading higher against the majority of 16 most actively currencies before the Bank of England interest rates announcement on Thursday, as the gauge of services activity PMI increased to 55.3, from 53.8 in February.
A level above 50 indicates growth and the report, in conjunction with positive manufacturing and construction figures earlier in the week, points to a recovery in the UK economy during the first quarter. It now seems increasingly likely that the UK will avoid a technical recession this year and the renewed sense of optimism has seen the Pound rally against the Euro, among other major currencies like the Australian Dollar and South African Rand.
The move against the higher yielding currencies is largely being driven by risk sentiment, as global stocks slumped this morning following the FOMC minutes last night and a disappointing Spanish bond auction this morning. To that end, the Pound has traded lower versus the U.S Dollar, falling back under 1.59, as traders flocked to the security of the Dollar as a safe haven.
The Euro has weakened significantly against the Pound and the U.S Dollar, after the bond auction in Spain led to renewed concern that the region is struggling to overcome the sovereign debt crisis and restore confidence in the outlook. The Euro also declined after the European Central Bank President Mario Draghi said that the outlook for the Euro-zone remains subject to “downside risks” and the single currency is likely to continue to struggle in this environment.
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