Pound euro exchange rate faces bullish prospects as markets return to business as usual - selling off the euro

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Published on Friday, 27 July 2012 08:49

Written by Will Peters

"There will be a threat of a reduction in capital inflows into Sterling, which could spark a downward spiral for the UK currency" - Adam Solomon at TorFX.

The pound to euro is 0.09 pct in the blue at 1.2784. We witnessed an impressive comeback by the euro yesterday, courtesy of determined words from Mario Draghi concerning the action the ECB is willing to take.

However, this morning, it appears it is business as usual. Indeed, from a technical perspective we could still expect further euro-bearishness.


UBS, advise as such saying that support for the GBP-EUR pairing is seen at 1.2682, and as long as this level holds we should look for a move to 1.2894.

That said, it must be said that the pound sterling isn't exactly the hottest kid on the block at present.

"The Pound continued to decline against the majors yesterday, as the fallout from the UK growth figures on Wednesday pushed Sterling back 1.2720 versus the Euro, amid increasing speculation that the Bank of England will step up asset purchases over the coming months in the wake of a deeper recession," says Adam Solomon at TorFX.

The UK currency found support just under 1.55 against the U.S Dollar but staged a significant rally to peak above 1.57 and rise to the highest level in three weeks.

"The move was down to Dollar weakness and an increase in risk appetite following bullish comments from the ECB President Mario Draghi, who said that policy makers will do whatever is necessary to instill confidence in the Euro-zone," says Solomon.

There was further speculation that the UK AAA credit rating would be in jeopardy following the much weaker GDP figures and that may continue to hamper Sterling.

"Although the immediate market impact has been somewhat limited, there will be a threat of a reduction in capital inflows into Sterling, which could spark a downward spiral for the UK currency," says Solomon.