Foreign Exchange Report : GBP EUR Exchange Rate Hits Two Month High as UK Import/Export Figures Push the Pound Higher

26 May 2011 at 5 AM - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP EUR Exchange Rate Hits Two Month High as UK Import/Export Figures Push the Pound Higher

The Pound Euro exchange rate (GBP EUR) is 1.1515. The Pound Dollar exchange rate (GBP USD) is 1.6305. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5391.

Yesterday morning’s data releases in the UK proved generally supportive for the Pound, as Sterling enjoyed a positive day on the currency markets.

The major UK data release of the day saw UK GDP Growth for the first three months of 2011 confirmed at a quarterly 0.5%. The annualised rate of increase in UK economic activity was also confirmed at 1.8%, as per the provisional figure. These numbers provided some relief for investors holding Sterling-denominated assets as the Office of National Statistics has downwardly revised provisional UK growth figures on more than one occasion in recent times.

UK import/export figures for Q1, which were released at the same time as the growth figures, provided further cause for optimism regarding Britain’s economic recovery. The numbers showed that British exports grew by 3.7% in the first three months of 2011, versus analysts’ expectations of a 2.1% increase. Meanwhile, the level of UK imports contracted by 2.3% in the same period, again bettering analysts’ expectations of a drop-off of only 0.7%.

These numbers suggest that the Bank of England’s tacit policy of ‘talking down the Pound’ in order to improve the UK’s terms of trade are having their desired effect in helping to revive Britain’s manufacturing base. It is likely that the figures will encourage UK policy-makers to make further Sterling-negative comments over coming months.

Meanwhile, in the Eurozone, talk of a restructuring of sovereign debts continued to dominate investors’ thoughts. Irish Prime Minister Enda Kenny got the ball rolling when he called for a lowering of interest rates on Ireland’s EU-IMF bail-out loans at the start of yesterday‘s European session.

The theme continued into the afternoon session when Eurogroup leader Jean-Claude Juncker voiced fears that a ‘re-profiling’ of Greece’s debts might not be enough to avoid a default by the debt-stricken Hellenic state.

The markets reacted to these events by sending the GBP EUR exchange rate to 1.1584, its highest level since mid-March. Further upside is possible for the pair if ECB President Jean-Claude Trichet adopts a less hawkish tone than usual in response to the Eurozone sovereign debt crisis when he speaks later this morning.


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