Foreign Exchange Rates – EUR/USD Rejects 1.4000 as Global Stocks Drop, While GBP Trades on the Level

10 Mar 2011 at 10 AM - Written by John Cameron

STORY LINK Foreign Exchange Rates – EUR/USD Rejects 1.4000 as Global Stocks Drop, While GBP Trades on the Level

The Euro Dollar exchange rate (EUR/USD) is 1.3839. The Euro Pound exchange rate (EUR/GBP) is 0.8558

Economic data released in China overnight has caused significant concerns in the market. The figures showed that Chinese exports grew by only 2.4% in February against expectations of 27.1% growth. Meanwhile, imports in China were also significantly lower than expectations in February. These two figures combined to give a February trade deficit of $7.3bn for the Chinese economy, against expectations of a surplus of $4.9bn.

The figures have stoked fears of an economic slow-down in the world’s second largest economy. The export element of the numbers have caused concerns over the strength of the global recovery.

The figure has caused the Nikkei 225 index in Tokyo losing almost 1.5% during yesterday’s Asian session, while the FTSE 100 has suffered significant losses in early trading. This signals a weakening of risk sentiment in the market, which may be accentuated if Gadaffi’s forces continue their rear-guard action in Libya. Government forces bombed a key oil installation yesterday, causing a further move forward for oil prices.

Meanwhile, in the Eurozone, fears grow that the sovereign debt crisis is escalating, as Moody’s moved to downgrade Spain’s national debt by one notch to Aa2. This follows their downgrading of Greece’s debt at the start of the week. If tomorrow’s ECB Emergency Debt Summit fails to deliver a positive action plan to tackle Eurozone debt, then global appetite for risk may be further diminished and the Euro may come under renewed selling pressure.

The decrease in global risk appetite has caused a strengthening of the US Dollar since yesterday’s European close. The EUR/USD rate has moved away from the 1.4000 level and currently trades slightly above 1.3800, whilst GBP/USD has also rejected its near-term highs and is doing a significant amount of work below 1.6200.

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