Foreign Exchange Report : GBP EUR Rate Trades Up Again as the Currency Market is Gripped by Fears Over Greece’s Debt Crisis

16 Jun 2011 at 5 AM - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP EUR Rate Trades Up Again as the Currency Market is Gripped by Fears Over Greece’s Debt Crisis

The Pound Euro exchange rate (GBP EUR) is 1.1422. The Pound Dollar exchange rate (GBP USD) is 1.6199. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5349.

The ongoing sovereign debt crisis in Greece once again took centre stage in the currency markets yesterday, causing the Euro to come under renewed selling pressure.

The market reacted particularly badly to reports of the contents of a leaked memo written by an official who was present at yesterday’s meeting of EU Commissioners in Brussels. The memo alluded to the ‘damaging failure’ of Eurozone Finance Ministers to reach an agreement on a possible second Greek bail-out.

The memo went on to suggest that German officials were ready to allow Greece to default on its debt commitments and that, if this was allowed to happen, ‘the viability of the ECB itself’, would come under threat, due to its holding of €49bn worth of Greek bonds. Summing up, the memo observed that EU Commissioners felt a collective ‘sense of foreboding’ regarding the perilous state of Greece’s finances.

Meanwhile, further uncertainty was added to the Greek situation following the emergence of market rumours yesterday afternoon which suggested that Greek Prime Minister George Papandreou had tendered his resignation in order to allow an emergency ‘government of unity’ to be formed. The old adage states that ’the market abhors a vacuum’ and this appeared to be holding true following the whispers, as commentators pointed out that the last thing Greece needs in its present situation is a lack of clear leadership.

Meanwhile, in the UK, yesterday morning’s labour market figures showed that UK unemployment dropped by 88,000 in the three months leading up to the end of April. This was the largest quarterly drop in British unemployment since 2000.

Yesterday’s developments saw the GBP EUR close almost a cent up at 1.1417. The US Dollar and Swiss Franc also benefited from their status as reserve currencies, as global equities markets universally lost ground due to fears over Greece’s debt crisis.

Conversely, the high-yielders gave up some of their recent gains on the day due to the dip in risk appetite, which saw the GBP AUD, GBP NZD and GBP ZAR rates all trade higher as fear took hold of the markets during yesterday afternoon’s European session.


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