Pound to euro exchange rates give back gains, pound dollar hopes to cling onto key level

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Published on Friday, 17 August 2012 09:38

Written by Sam Coventry

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The prospects of the GBP-EUR exchange rate will depend on how the current approach to risk sustains itself through the day.

The pound euro exchange rate is 0.26 pct down at 1.2703.

The pound dollar is 0.1 pct in the red at 1.5718.

Sterling gave backs some early gains as the market responds to Merkel’s comments.

The euro gained some traction on comments from German Chancellor Angela Merkel, which indicated support for ECB President Draghi’s commitment to preserving the euro.


She stated yesterday that “We feel committed to do everything we can to maintain the common currency.”

"Despite a distinct lack of action, the market is being highly responsive to these sort of comments, which is probably a measure of how deep concerns are over the survival of the euro," notes Richard Driver at Caxton FX.

Sterling is trading down at 1.27, despite yesterday’s data revealing impressive 0.3 pct growth in UK retail sales in July.

No doubt a positive risk-on attitude in the equity markets is assisting the single currency, and the prospects of the GBP-EUR exchange rate will depend on how this approach to risk sustains itself through the day.

Turning to the pound to dollar rate, this pair tracked yesterday’s rally in EUR-USD but once again struggles above 1.57.

The dollar was weak yesterday amid very positive market conditions, as shown by hefty gains in US stocks. Some softer data from the US hampered the greenback, with some regional manufacturing data disappointing in particular. EUR/USD dragged this pair up with it yesterday but once again we are seeing sterling run out of steam above $1.57.

"We expect the dollar to finish the week a bit stronger, so we continue to anticipate a move lower for this pair. These represent excellent levels to buy USD," says Driver.