British pound sterling rallies to a fresh three-and-a-half year high against the EUR, more gains are expected

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Published on Tuesday, 10 July 2012 09:13

Written by Sam Coventry

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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 pound sterling (Currency:GBP) continues to dominate the euro on the global FX space with a number of analysts forecasting further falls in the single currency.

The pound euro exchange rate is 0.07 pct higher than at Monday night's closing level at 1.2610.

The pound dollar exchange rate is 0.1 pct in the blue at 1.5540.


The pound Australian dollar exchange rate is 0.15 pct lower than at Tuesday's closing level, GBP-AUD is at 1.5195.

"The Pound 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," says Adam Solomon, analyst and head dealer at TorFX.

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.

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. But, the falls were not enough to prompt expectations of further Fed easing - this would have seriously impacted the US dollar.

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%.

"The Euro is likely to continue weakening over the coming weeks and it’s probably in your best interests to secure the rate for the conversion to Sterling as quickly as possible," says Solomon.