Foreign Exchange Report : GBP EUR Rate Dips While Price of a Barrel of Crude Oil Heads Lower as Libyan Crisis Nears a Resolution

22 Aug 2011 at 6 AM - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP EUR Rate Dips While Price of a Barrel of Crude Oil Heads Lower as Libyan Crisis Nears a Resolution

The Pound Euro exchange rate (GBP EUR) is 1.474. The Pound Dollar exchange rate (GBP USD) is 1.6480. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5863.

The Pound endured a poor day in the currency markets on Friday. Sterling opened brightly against the Euro to trade to within 0.6c of a 5-month high against Europe’s single currency. However, this optimism evaporated as the session progressed, seeing the Pound close over a cent below the daily high.

This downward move was partly technical, as speculators took profit at top of the range rates, sending Sterling lower. However, there were also several fundamental drivers, with Friday morning’s Public Sector Borrowing figures showing that the UK government borrowed £5.6bn in July alone, highlighting the tough task the British policy makers face in reducing the UK’s national debt.

Meanwhile, Friday morning saw the release of German Producer Price data, which showed that factory gate prices from German manufacturers rose by an annualised 5.8% in July, accelerating from June’s figure of 5.6%. Analysts had expected that this leading indicator of inflation would have dropped back to 5.3%; the fact that it didn’t caused market makers to upwardly adjust their expectations for future Eurozone interest rate rises.

Elsewhere, oil prices have eased since this morning’s market open, as rebels entered
Libya’s capital Tripoli, raising hopes that the prolonged conflict in the troubled North African state is coming to an end. If this is the case, then Libyan oil production, which was running at 1.6m barrels per day prior to the conflict making Libya the twelfth largest oil producer in the world, should return to normal levels, causing a further drop in the price of a barrel of crude. If this causes increased global economic activity, leading to an increased demand for oil, then it will be the usual oil producing nations who will benefit disproportionately, leading the Norwegian Krone and Canadian Dollar to garner support in the currency market.


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