Outlook For Pound Euro Exchange Rate (GBP EUR) Positive As Italy Chooses Anti-Austerity Leader

Modified: Friday, 26 April 2013 08:32 BST - Written by Ben Hughes

STORY LINK Outlook For Pound Euro Exchange Rate (GBP EUR) Positive As Italy Chooses Anti-Austerity Leader

Two months after its inconclusive general election, Italy appears to have a new leader in place. Yesterday afternoon’s session brought the announcement that the debt-saddled Mediterranean nation’s President Giorgio Napolitano had asked Enrico Letta, the little-known deputy leader of the centre-left Democratic Party, to form a new rainbow coalition which will attempt to govern moving forward. Letta immediately set the tone for his new administration by publicly stating that his country’s austerity plan is ‘no longer enough’. He went on to suggest that he would try to convince the eurozone’s other struggling nation states to ditch their austerity plans.

Currency market participants were unimpressed by the thought of a widespread jettisoning of austerity by continental Europe and they voted with their feet by shifting their funds out of euro-denominated assets en masse. The move sent the Pound to euro exchange rate (currency : GBP/EUR) up to close to 1.1900 by the latter part of yesterday’s European equities session.

Elsewhere, yesterday’s session proved to be a strongly positive one for the Pound Sterling, as official UK government figures revealed that Britain’s economy had avoided tumbling into an unprecedented triple dip recession. The news saw the Pound US Dollar exchange rate (currency : GBP/USD) accumulate to close to 1.5500. The pair now appears to have convincingly rejected the sub-1.5000 levels of earlier this year. Gains for Cable may be accentuated today by the overnight news that the South Korean economy grew at its fastest pace for two years during the first three months of 2013. The expansion of 0.9% provided encouraging news for investors and may see appetite for risk burgeon today, causing a widespread shift out of safe haven assets including the Greenback. Such a move could send GBP USD back up towards the higher end of the 1.5000s, with its pre-Christmas levels just below 1.6400 providing a medium-term target.

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