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Foreign Exchange Rates : GBP EUR Rate Up Late as S&P Downgrades Greece's Debt

May 10, 2011 - Written by John Cameron

The Pound Euro exchange rate (GBP EUR) is 1.1452. The Pound Dollar exchange rate (GBP USD) is 1.6385.

The Eurozone’s sovereign debt woes continued yesterday as leading Ratings Agency Standard and Poor’s moved to downgrade Greece’s credit rating from B to BB-, moving the troubled Hellenic state’s gilts closer to junk bond status.

S&P’s action followed close on the tail of last week’s rumours that Greece was preparing to exit the single European currency.

The week’s European session had started positively for the Euro, with the GBP EUR pair opening at a lower level than it had closed on Friday, suggesting that market participants felt that the single currency had been over-sold at the end of last week.

Positive sentiment continued for the Euro when yesterday morning’s German Trade Balance figure for March came out at €18.9bn versus analysts’ expectations of a €13.3bn print. The figure provided the markets with confirmation that, for the time being at least, the German economy appears to have strong enough shoulders to prop up the Eurozone’s troubled peripheral states.

Meanwhile, in the UK, the Halifax House Price Survey for April showed an unexpected monthly drop of 1.4%. This was the survey’s largest monthly fall for seven months.

European and British data releases combined to cause the GBP EUR rate to drop to 1.1340, but it has since moved upwards by over a cent due to renewed fears over the state of Greece’s economy.

Elsewhere, support for the high-yielders, (AUD, NZD, ZAR), on the day, suggested that the markets were generally impressed by Friday afternoon’s US Non-Farm Payroll figure, which showed that considerably more jobs had been created in the US economy last month than had been anticipated. Analysts had been concerned that the figures, which also showed an unexpected rise in the level of US unemployment, might send out mixed messages about the strength of the US recovery, causing a dip in appetite for risk. However, these fears did not materialise as yesterday’s session unfolded.

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