British pound sterling rallies to fresh three-and-a-half year high vs EUR, currency markets prefer the relative security of GBP

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Published on Monday, 09 July 2012 08:59

Written by Will Peters

International Money Transfers at our sister site

"The Euro was already under pressure after the European Central Bank went ahead and cut interest rates on Thursday to a new record low with the Pound rising through 1.2580" - Adam Solomon at TorFX.

The pound sterling (Currency:GBP) has rallied to a fresh three-and-a-half year high against the Euro at 1.2607, as investors became increasingly uneasy over the outlook for the Euro-zone and sought the relative security of the Pound, which has benefited from increased demand due to its position outside of the Euro-zone.

Looking at the spot rates we see the pound euro exchange rate is unchanged on a day to day basis and is at 1.2613 at 9:50 AM.

The pound dollar exchange rate is 0.03 pct lower at 1.5481. The pound Australian dollar rate is 0.47 pct higher at 1.5242.

(Latest exchange rate forecasts are updated on our IMT site, access issued Free via this Facebook entrance path).


The euro is this morning witnessing pressure from Eurozone bond markets.

The yield on Spanish 10-year sovereign debt has crept over the 7% mark. That's its highest level since the EU summit at the end of June.

This reflects the uncertainty over how the measures agreed at the summit will be implemented.

"The Euro was already under pressure after the European Central Bank went ahead and cut interest rates on Thursday to a new record low with the Pound rising through 1.2580. The single currency continued to weaken into Friday, as a disappointing non-farm payrolls figure caused a sharp decline in risk appetite," says Adam Solomon at TorFX.

But in currency land the data was not as bad enough to increase expectations for increased quantitative easing at the US Fed.

This eventuality would be expressed through a depreciation in the US dollar, and should data out of the US deteriorate we could thus expect further support for the euro.

There was just 80,000 jobs added in June, despite expectations of 100,000, which gave investors cause for concern that the U.S economic outlook may be worsening.

Although the Pound slipped back towards 1.55 against the Dollar, the UK currency continued to make gains versus the Euro, as Spanish 10-year bond yields rose back above 7%.