GBP CAD Exchange Rate Could Break Lower, Euro Currency Remains Under Pressure

Modified: Friday, 10 August 2012 09:03 BST - Written by John Cameron

STORY LINK GBP CAD Exchange Rate Could Break Lower, Euro Currency Remains Under Pressure

A tension exists in the eurozone and it is hurting the region’s currency. Yesterday’s session provided further evidence of this, with the euro leaking support against virtually all of the other majors. Investors are fully aware of the fact that several eurozone states are facing up to their own individual debt crises; this much has been known for months, if not years. However, the widespread austerity measures which have been implemented by several of these states, including Greece, Italy, Spain, Portugal and Ireland, are now beginning to feed into Europe’s real economy with a vengeance. Yesterday’s Monthly Report from the European Central Bank added to the impression that austerity is hurting prosperity – the report predicted that whole-of-eurozone economic activity will contract by 0.3% during 2012. This leaves mainland Europe facing a potentially crushing ‘debt trap’ as spending cuts and increased taxes lead to lower tax yields for individual governments, worsening their respective deficits. The upshot could be the dawning of an economic winter which would see tens of millions of newly unemployed workers across the continent. As things stand, the euro has suffered a sustained loss of support in the currency markets, however the GBP EUR exchange rate has remained in the high 1.20s throughout this episode. If matters deteriorate in Europe, then exchange rates in the 1.30s or higher look a distinct possibility.

Looking ahead to today’s session, Canadian employment data, penned in for release this afternoon, will be closely-watched. Recent Canadian economic indicators have been relatively positive in tone, causing the GBP CAD exchange rate to settle back in the mid-1.50s. If this afternoon brings further good news for Canada, then the pair may make a run at March’s 10½ month low at 1.5464.

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TAGS: Canadian Dollar Forecasts Daily Currency Updates Euro Forecasts Eur Forecasts