Foreign Exchange Report : GBP AUD Plummets to 26-Year Low as Greece Votes ?Yes? to Austerity, GBP EUR Down Again

June 30, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP AUD Plummets to 26-Year Low as Greece Votes ?Yes? to Austerity, GBP EUR Down Again

The Pound Euro exchange rate (GBP EUR) is 1.1101. The Pound Dollar exchange rate (GBP USD) is 1.6108. The Pound Australian Dollar exchange rate (GBP AUD) is 1.4989.

Greece’s parliament yesterday voted in favour of the proposed package of austerity measures by 155 votes to 138. The voting was not as clear-cut as some analysts had expected, with one member of the ruling PASOK party joining the opposition ranks in voting ‘no’, while there were two abstentions and five deputies merely noted that they were present.

The ‘yes’ vote sparked violent clashes between masked protestors and security forces in Athens overnight, but the financial markets responded in a more positive fashion to the outcome. Equities have surged forwards since the vote, with the FTE 100 closing up by over 1.5%, whilst US stocks enjoyed their third consecutive day of gains.

It was no surprise that Eurozone policy-makers also reacted positively to developments in Greece, with German Chancellor Angela Merkel describing the ’yes’ vote as ’really good news’. Greece is more indebted to Germany than any other individual state in the world.

The upward move in global appetite for risk has benefited the high yielding currencies, with the GBP AUD exchange rate breaking below the 1.5000 level overnight for the first time in twenty-six years, as institutional investors piled into riskier, more rewarding asset classes.

The GBP NZD rate also dropped to a multi-year low of 1.9369 overnight, for similar reasons. This move was accentuated by last night’s release of the National Bank of New Zealand’s Business Confidence survey for June, which showed a pick-up from 38.3 in May to 46.5 this month.

The market’s focus will once again be on Greece’s parliament today, with deputies facing a second round of voting, this time on the implementation of the austerity package which they voted for, in principal, yesterday. Political analysts believe that more deputies are likely to vote ’no’ today as they are asked to approve the specifics of the spending cuts, tax increases and privatisation plans. The Euro is not out of the woods yet.


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