Foreign Exchange Insight : GBP EUR Threatens to Break to a 7-Month High as Eurozone Finance Ministers Dither and Concerns Grow for Franco-Belgian Bank Dexia

4 Oct 2011 at 9 AM - Written by John Cameron

STORY LINK Foreign Exchange Insight : GBP EUR Threatens to Break to a 7-Month High as Eurozone Finance Ministers Dither and Concerns Grow for Franco-Belgian Bank Dexia

The Pound Euro exchange rate (GBP EUR) is 1.1704. The Pound Dollar exchange rate (GBP USD) is 1.5412. The Pound Australian Dollar exchange rate (GBP AUD) is 1.6310.

Greece’s long slow death dance continued yesterday as news emerged from the Eurozone Finance Ministers’ summit in Luxembourg that a decision on whether to grant the debt-addled Hellenic state its next tranche of emergency funding is to be deferred until November. The Eurogroup had been due to make a decision on Greece’s bail-out funding on 13th October and Greek policy-makers had previously stated that they required additional funding by this date in order to avoid reneging on their existing debt obligations. The market traditionally abhors a vacuum, so the Eurozone Finance Ministers’ inaction piled the pressure on the Euro late yesterday, sending the GBP EUR rate to within 2 pips of a 7-month high at 1.1722.

Elsewhere, there was more concerning news for investors holding Euro-denominated assets yesterday as fears grew for European banking giant Dexia, which has been partly owned by the French and Belgian government since its balance sheet problems of 2008. Dexia shares are currently trading down by almost 40% following reports that leading credit ratings agency Moody’s are reviewing the troubled bank’s credit ratings.

Meanwhile, Sterling was supported during yesterday’s session as the markets responded positively to an announcement by the UK’s Chancellor of the Exchequer, George Osborne, that the British government would be looking at ways of promoting lending to small/medium enterprises via a policy known as ‘Credit Easing’. It is likely that the scheme would involve the treasury directly purchasing corporate bonds from companies to boost their liquidity; other options are for the UK government co-funding loans from retail banks to SMEs.

However, Osborne also suggested that he would be in favour of a ramping-up of the Bank of England’s Quantitative Easing scheme, a move which would be likely to cause heavy selling pressure on the Pound. The market nervously awaits Thursday’s Bank of England monetary policy committee meeting….


For other live currency exchange rates and a currency converter see the currency news website.

TAGS: Daily Currency Updates Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts