Pounds to Euros Exchange Rate Today - GBP EUR Drops on S&P’s Threat of Debt Downgrade. GBP AUD Up On Australian Interest Rate Hike.

6 Dec 2011 at 9 AM - Written by Tim Boyer

STORY LINK Pounds to Euros Exchange Rate Today - GBP EUR Drops on S&P’s Threat of Debt Downgrade. GBP AUD Up On Australian Interest Rate Hike.

The Pound Euro exchange rate (GBP EUR) is 1.1693. The Pound Dollar exchange rate (GBP USD) is 1.5634. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5322.

In a major development overnight, leading ratings agency Standard & Poors has placed almost every Eurozone nation on ‘credit watch’. The two nations which avoided being placed on S&P’s danger list were Greece and Cyprus and they only avoided being added because their credit ratings are so low already.

S&P’s action means that the Eurozone’s six AAA rated nations – Germany, France, the Netherlands, Austria, Finland and Luxembourg, have a 50% chance of having their sovereign ratings downgraded in the next three months. S&P’s report, which accompanied the announcement, added that the ratings agency is considering downgrading France’s rating by two notches, due to the French retail banking sector’s exposure to potentially toxic debts of neighbouring states.

S&P’s action followed a seemingly positive day for the Euro, following the latest in a seemingly endless succession of meetings between German Chancellor Angela Merkel and French President Nicolas Sarkozy. The meeting yielded an accord between the Eurozone’s two predominant powers, on changes to the treaty which governs the region. The proposed changes include automatic sanctions for any state accruing a deficit of more than 3% of its annual GDP.

Earlier in yesterday’s session, there had been further positive news for the Euro with the release of better-than-anticipated October Retail Sales data for the region, which showed a month-on-month expansion of 0.4% in shop sales, as opposed to an expected 0.1%. September’s counterpart figure had show a contraction of 0.6% in Eurozone Retail Sales.

Meanwhile, yesterday morning’s UK PMI Services Sector survey once again provided encouragement for investors holding Sterling-denominated assets. The closely-watched survey showed that growth in this key sector of the British economy accelerated last month, providing hope that a dreaded double-dip recession can be avoided.

Elsewhere, the Australian Dollar has come under significant selling pressure after the Reserve Bank of Australia cut Australia’s key lending rate by 0.25% to 4.25%. Although this wasn’t a complete surprise, it was very far from being fully ‘factored-in’ by market participants, leaving further potential for downside for the Aussie later in today’s session. The RBA noted in its accompanying statement that the Eurozone’s ongoing debt crisis was likely to weigh heavily on both Australia’s domestic economy and the global economic picture as a whole, in coming months.

The net effect of developments over the past twenty four hours has been to put an end to the ‘risk on’ trading environment, which saw several global stock indices gain over 7% during last week’s session. The flight to safety caused losses of over 1% for both the Nikkei 225 and Hang Seng overnight. European indices have opened up down by between 0.50% and 1.50%, as investors express their concern that a potential downgrade of Eurozone sovereign debts could render the ECB/EU/IMF’s bail-out fund powerless. If investor caution continues for the remainder of today’s session, expect the US Dollar and Japanese Yen to be supported, while institutional investors shift out of the riskier Aussie, New Zealand Dollar and South African Rand. Many analysts have suggested that yesterday’s developments may favour the Pound as European market participants seek out the relative safe haven of UK gilts.


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