Foreign Exchange Insight : GBP USD Rate Trades Lower as Crude Oil Drops, While EUR Gains Further Support

June 28, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Insight : GBP USD Rate Trades Lower as Crude Oil Drops, While EUR Gains Further Support

The Pound Euro exchange rate (GBP EUR) is 1.1173. The Pound Dollar exchange rate (GBP USD) is 1.5972. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5281.

The Euro made gains against the other majors during yesterday’s session, as the debate on the introduction of proposed austerity measures got underway in Greece’s parliament.

Market participants appeared to be confident that tomorrow’s vote in the Greek parliament will yield a positive outcome, sending the GBP EUR rate down as low as 1.1163 on the day. The Pound has only made been lower than this against the Euro on one brief occasion in the last fifteen months.

Elsewhere, the price of a barrel of Brent crude oil traded down to $102.31, its lowest level since the middle of February during yesterday’s session, providing an indication of the uncertainty that investors feel regarding the strength of the global recovery given the soft nature of recent data releases in the US, Japan and Australia.

Brent crude prices have now lost over $10 since last Thursday; this sharp downward movement is largely attributable to the International Energy Agency’s announcement last Thursday that it was set to tap into its emergency reserves and release two million barrels of crude per day onto the market for the next thirty days in order to compensate for the loss of supply caused by civil unrest in Libya.

The downward movement in oil prices benefits the US economy above all others, as the States is by far the largest net importer of oil in the world. The downward easing of oil prices helped the GBP USD rate to trade down to 1.5912 yesterday, its lowest level since January. Further downward movement in commodities prices could see GBP USD trend down towards the 1.5350 level which provided strong support in September 2010 and again in December 2010. Any downgrading of the UK’s finalised Q1 GDP figure, released this morning, could accelerate this move.


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