Foreign Exchange Report : GBP EUR Rate Rises as S&P Downgrades Italy’s Debt Rating, While GBP USD Rate Heads Lower

20 Sep 2011 at 8 AM - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP EUR Rate Rises as S&P Downgrades Italy’s Debt Rating, While GBP USD Rate Heads Lower

The Pound Euro exchange rate (GBP EUR) is 1.1489. The Pound Dollar exchange rate (GBP USD) is 1.5704. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5328.

There was further bad news for the Euro overnight, with leading credit ratings agency S&P downgrading Italy’s sovereign debt rating from A+ to A. In its accompanying commentary, S&P stated that it considered the outlook for Italy’s economy to be ‘negative’ and voiced concerns about future growth rates following the Italian parliament’s passing of stringent austerity measures in recent months.

Elsewhere, Greece’s painful debt saga continues to rumble on, with Greek policy-makers meeting with officials from the so-called ‘Troika’ of the European Central Bank, the European Commission and the International Monetary Fund yesterday. The 'Troika' are the triumvirate of authorities who hold Greece’s fate in the palms of their hands, so there was some relief when Greek officials described yesterday’s meeting with ECB, EC and IMF officials as ‘productive’. Talks continue today.

Global stock markets lost considerable ground on the day yesterday, with rumours of an imminent Greek debt default failing to dissipate. The US Dollar continued to be the main beneficiary as appetite for risk drained from the market, taking the GBP USD rate to a new 8-month low of 1.5633 during yesterday afternoon’s session.

Meanwhile, the Euro lost ground against most of the other sixteen most actively-traded currencies. However, the GBP EUR failed to break last week’s 6-month high of 1.1724, in spite of all of the Euro-negative sentiment in the market. This was due to a Sterling-negative Quarterly Bulletin from the Bank of England, which estimated that the Bank’s £200bn Quantitative Easing programme had added 2% to the UK’s GDP figures and caused inflation figures to be 1.5% higher than they would otherwise have been. This new information seemingly makes a UK interest rate rise a more distant prospect than ever.


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