European Commission Issues Warning To Spain And Slovenia, But GBP EUR Exchange Rate Edges Lower

Published: Wednesday, 10 April 2013 15:00 BST - Written by Frank Davies

STORY LINK European Commission Issues Warning To Spain And Slovenia, But GBP EUR Exchange Rate Edges Lower

Today’s session has once again seen global share markets register healthy gains, with London’s benchmark FTSE 100 trading up by almost 1% with two hours of the day’s equities session remaining. Frankfurt’s Dax has registered gains of an even greater magnitude so far today.

The improvement in global risk sentiment has taken place against a back-drop of yet another doom-laden forecast from a leading global authority. This time it was the World Trade Organisation (WTO) dampening any thoughts of an improvement in the worldwide economy this year. The WTO issued a report a short time ago which downgraded its previous forecast for the level at which the level of world trade will grow during 2013. The WTO’s previous estimate of a 4.5% expansion in shipments between countries this year was trimmed to 3.3% due to unconvincing efforts by global policymakers to boost levels of demand in their respective economies.

The development would ordinarily spell bad news for high-yielding currencies including the Australian and New Zealand Dollars and for the South African Rand. However, such are the levels of optimism, (some would say euphoria?), amongst institutional investors, that the risk-driven currencies have continued to record gains against the Pound. The Pound to Australian Dollar exchange rate (currency : GBP AUD) tumbled to as low as 1.4507 earlier today, while Sterling versus the New Zealand Dollar (currency : GBP NZD) plunged down into the 1.7800s for the first time this millennium.

Elsewhere, the European Commission issued a statement a short time ago which issued a warning to Spain and Slovenia regarding ‘imbalances’ in their economies. The EC’s comments appear to hint that fears remain regarding the levels of governmental indebtedness in the two European states. The Pound euro exchange rate has registered losses in spite of the Commission’s warning; GBP EUR currently trades at 1.1697. However, a flare-up in the eurozone’s debt crisis would heap pressure on the single currency moving forward.

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