Pound euro exchange rate moves higher as yesterday's EUR strength was built on weak foundations

Details

Published on Wednesday, 22 August 2012 09:22

Written by Rob Samson

International Money Transfers at our sister site

Latest news and comment on the pound vs euro cross rate which has this morning moved once again in favour of GBP.

The pound to euro is 0.13 pct in the blue at 1.2688 (EUR-GBP at 0.7881). at  this morning as sterling continues to show its underlying strength against the single currency.

Yesterday was a good day for the EUR which rose across the board on expectations that the ECB was in fact moving towards capping peripheral bond yields.

This, however, has ultimately proven to form a weak foundation for the euro vs the pound:


"Yesterday's anticipation of possible ECB action to ease Spanish and Italian borrowing costs lifted EUR-GBP to slightly higher levels. As we do not consider this a sustainable support factor, pivotal moves should emerge between 0.7850 and 0.7900," says a morning note from UniCredit.

Sterling appears to have brushed aside UK Monthly public sector borrowing data were again worse than expected.

"In line with the market reaction of late, this didn’t harm sterling. On the contrary, a real test of the 0.7884 resistance didn’t occur even as the UK data could have been a reason for such a move. EUR/GBP settled in the 0.7870/80 area," note KBC Markets.

Today, there are no important eco data in the UK. KBC Markets say they assume that the EUR-GBP will continue to track the global trend of the single currency which is incidentally looking pretty resilient against the USD.

"It will be interesting to see how long the ‘ECB-hope-rally’ can be sustained," note KBC.

A look at the markets this morning shows that yesterday's market euphoria has indeed come to an end as investors await the outcome of Greek PM Samaras' talk with Eurogroup chief Juncker.

There is also anticipation ahead of the release of minutes from the US Fed's last rate meeting.

Poor Japanese trade data also sent markets lower.

Japanese exports to the European Union plunged 25.1pc year-on-year amid the region's debt crisis, the country's finance ministry said today.

The FTSE 100 in London fell 0.9pc to 5,805.78, while the CAC 40 in Paris fell 0.5pc to 3,494.56 and Frankfurt's DAX 30 slipped 0.7pc to 7,038.63. The IBEX 35 in Madrid fell 1pc to 7,474.05.