Foreign Exchange Report : GBP USD and EUR CHF Rates Plummet as Global Risk Appetite Ebbs

24 Jun 2011 at 6 AM - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP USD and EUR CHF Rates Plummet as Global Risk Appetite Ebbs

The Pound Euro exchange rate (GBP EUR) is 1.1228. The Pound Dollar exchange rate (GBP USD) is 1.6014. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5197.

The Euro came under heavy and sustained selling pressure yesterday, as investors reacted to comments made by Fed Chairman Ben Bernanke on Wednesday night that a failure to resolve Greece’s debt situation, ‘would pose threats to the European financial systems, the global financial system and to European political unity.’

Bernanke’s words, combined with the absence of any soothing comments from leaders attending the EU summit in Brussels, saw the EUR USD rate drop by over 1.5% by the middle of the European afternoon session.

The prevailing mood of anxiety regarding Greece’s debt woes also served to drag global equities markets lower, with London’s FTSE 100 closing down by 1.71% and the Frankfurt and Paris exchanges recording even greater losses on the day.

This down-shift in global risk appetite elicited strong support for the world’s reserve currencies of choice - the Swiss Franc and the US Dollar. This saw the GBP USD rate trade down to within a pip of it’s lowest level since January, at 1.5938. The EUR CHF pair continued its recent unprecedented bear-run, breaking to another new record low of 1.1846.

However, the mood of gloom which had enveloped the markets during yesterday’s European session was lifted by comments emanating from the EU Leaders’ summit in Brussels last night. European Commission President Jose Manuel Barroso stated that there was "a real will of the member states to do what is necessary", to resolve Greece’s debt situation. Barosos’s comments were backed up by European Council President Herman Van Rompuy, who stated that the EU was acting to make development funds more readily accessible to Greece.

These comments served to bolster both risk sentiment and the Euro, which saw Asian equities move forward overnight and the GBP EUR rate retrace from yesterday’s high of 1.1300.


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