Foreign Exchange Insight : Pound Euro Exchange Rate Drops as Berlusconi is Set to Resign, CAD AUD NZD and ZAR Also Gain

Published: Wednesday, 9 November 2011 06:00 BST - Written by John Cameron

STORY LINK Foreign Exchange Insight : Pound Euro Exchange Rate Drops as Berlusconi is Set to Resign, CAD AUD NZD and ZAR Also Gain

The Pound Euro exchange rate (GBP EUR) is 1.1632. The Pound Dollar exchange rate (GBP USD) is 1.6096. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5531.

Sometimes when you win, you lose; Italian Premier Silvio Berlusconi won a key budget vote in Italy’s Parliament yesterday afternoon with 308 members voting ‘yes’ and none voting against the motion.

On the face of it, this appears a resounding victory, however 321 members of Italy’s lower house failed to cast a vote as Berlusconi’s junior coalition partner, the Northern League, joined the ranked opposition in abstaining, meaning that the Italian Premier had failed to win a majority.

This lead to renewed calls from Italy’s opposition for Berlusconi to resign, causing uncertainty in the markets which saw the Euro come under renewed selling pressure in the latter part of yesterday’s European session.

The vote precipitated a meeting between Berlusconi and the Italian Head of State, President Giorgio Napolitano, late yesterday. Following the meeting, Napolitano announced that Berlusconi would step down as Italian Prime Minister following the approval of key economic reforms by the Italian lower house.

The markets greeted the news with some relief, sending North American equities higher and reversing the ‘risk-off‘ trading environment which had been prevalent since the start of the week. This caused support for the high-yielding currencies, sending the GBP AUD, GBP NZD and GBP ZAR rates lower.

Commodity-driven currencies including the Norwegian Krone and Canadian Dollar also found supported, as optimism grew that Italy, the Eurozone’s third largest economy, may now get the leadership it needs to steer it away from a debt meltdown.


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