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Foreign Exchange Update : GBP EUR Rate Set to Rise as Eurozone Sovereign Debt Woes Continue

May 31, 2011 - Written by John Cameron

The Pound Euro exchange rate (GBP EUR) is 1.1503. The Pound Dollar exchange rate (GBP USD) is 1.6541. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5442.

The British Chambers of Commerce issued a gloomy prognosis for the UK economy in a report which was released over the weekend.

The BCC downgraded its 2011 growth forecast for the UK economy from an initial estimate of 1.4% to 1.3%, significantly lower than the British government’s official prediction of an annualised growth rate of 1.7%.

The BCC also downwardly revised its expectations for the expansion of the UK economy in 2012 from 2.3% to 2.2%.

The independent organisation blamed the downgrading of growth estimates on UK households cutting back spending due to rising prices. The report went on to predict that the upward pressure on UK prices would force the Bank of England to raise interest rates as soon as August, a move which would be Sterling-positive, if it came to pass.

Elsewhere, last week’s session ended on a negative note for the Euro as Greek politicians failed to reach an accord on the form that future austerity measures should take in the debt-addled Hellenic state. This puts Greece’s next tranche of EU-IMF emergency loans at risk and brings the threat of Greece defaulting on its debt obligations ever closer.

Despite the negative news emanating form the Eurozone at the end of last week, the GBP EUR exchange rate hovered just above the 1.1500 level during yesterday’s session. However, trading volumes were significantly lower than usual on the day due to a UK Public Holiday, so the real Euro downside may be delayed until later today.

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