Foreign Exchange Report : Euro Remains Under Pressure, While GBP AUD Rate Falls Away

June 15, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Report : Euro Remains Under Pressure, While GBP AUD Rate Falls Away

The Pound Euro exchange rate (GBP EUR) is 1.1351. The Pound Dollar exchange rate (GBP USD) is 1.6368. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5288.

Chairman of the Federal Reserve, Ben Bernanke, issued a stark warning to US policy-makers when he spoke last night. Bernanke echoed a report issued last week by leading rating’s agency Moody’s when he stated that the US is in danger of losing its AAA credit rating if warring Democrat and Republican factions in Congress failed to reach agreement on raising America’s Debt Limit from its current $14.3tn level.

Bernanke stated that, ‘failing to raise the debt limit would require the federal government to delay or renege on payments for obligations already entered into,’ effectively meaning that the US would default on some of its debts, causing ‘severe disruptions in financial markets’ and damaging the Dollar’s status as the global economy’s leading reserve currency.

On the other side of the Atlantic, Greece’s sovereign debt crisis rumbles on. Eurozone Finance Ministers failed to reach an agreement on a second Greek bail-out at an emergency meeting convened in Brussels yesterday. The sticking point for the European Finance Chiefs appears to be an argument regarding the extent to which European banks can be ‘encouraged’ to voluntarily commit funds for the second bail-out. Ministers emerging from the meeting stated that they hope to reach an accord by the end of June.

Meanwhile, yesterday saw mass protests in Athens against further austerity measures, as workers threatened to call a general strike. The ongoing Greek situation has caused sustained selling pressure on the single European currency, with the GBP EUR rate softening from last Wednesday’s low of 1.1141 to touch 1.1383 in early trading yesterday.

Elsewhere, Glenn Stevens, the Governor of Australia’s central bank, issued a hawkish statement last night, predicting that Australian interest rates will need to rise in order to curb upward domestic price pressures. He also stated that he expects the Australian economy to structurally strengthen, even if the pace of economic expansion in China relents. Stevens’s words caused the GBP AUD exchange rate to re-trace downwards from yesterday’s high of 1.5479 to hit an overnight low of 1.5275.


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