Pound To Euro Exchange Rate Drops Following German MPs? ?Yes? Vote To Greek Bail-Out

Published: Tuesday, 28 February 2012 09:00 BST - Written by Frank Davies

STORY LINK Pound To Euro Exchange Rate Drops Following German MPs? ?Yes? Vote To Greek Bail-Out

The Pound Euro exchange rate (GBP EUR) is 1.1794.

There was good news for investors holding euro-denominated assets late yesterday afternoon, when German MPs gave their backing to Greece’s proposed €130bn bail-out package, which was agreed last week.

There was some dissent in the ranks and the vote was by no means unanimous – some 90 MPs voted against the package. However, the fact that the eurozone’s most politically significant nation has lent its support to the policy provided significant support for the euro in late trading yesterday. This has seen the GBP EUR exchange rate dip to 1.1780 in early trading today. Further downside is possible for the pair as today’s session progresses.

This afternoon’s German inflation data is likely to provide further direction for Europe’s single currency. The February CPI print is expected to show that the rate of price rises in the eurozone’s powerhouse economy eased to 2.2% last month, down from January’s 2.3% figure. Lower German inflation could renew pressure on the euro, as it would allow the ECB further leeway to cut the region’s interest rates later in the year.

Elsewhere, the high-yielding Australian and New Zealand Dollars and the South African Rand were well-supported after the European close yesterday, as institutional investors regained their appetite for risk thanks to the positive bail-out vote in Germany. This saw the GBP AUD exchange rate tumble to 1.4684 late yesterday. The GBP NZD and GBP ZAR rates showed similar downward moves to touch 1.8809 and 1.9078 respectively.

With London, Frankfurt and Paris’s hare indices opening up this morning, there is a strong likelihood that the AUD NZD and ZAR will continue their forward moves throughout today’s session.

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