Foreign Exchange Insight : GBP EUR Breaks to New 15-Month Low, While GBP CHF Shoots Upwards Following Parliamentary Approval for Greece?s Austerity Package

July 1, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Insight : GBP EUR Breaks to New 15-Month Low, While GBP CHF Shoots Upwards Following Parliamentary Approval for Greece?s Austerity Package

The Pound Euro exchange rate (GBP EUR) is 1.1076. The Pound Dollar exchange rate (GBP USD) is 1.6077. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5012.

The major news in the currency markets yesterday once again emanated from Greece, where the ruling PASOK party gained parliamentary support for the implementation of its proposed austerity measures. The vote in favour of the measures will see Greece raise taxes and decrease government spending by €28bn over the next five years.

However, Greece’s Prime Minister, George Papandreou, reminded colleagues after the vote that, ‘we have still many difficult and crucial battles ahead of us.’ This comment was reflected in the GBP EUR rate, which lost significant ground in the lead-up to the vote, having traded as high as 1.1283 during Monday morning’s European session. By yesterday morning, GBP EUR had reached 1.1026, a new 15-month low. The rate recovered slightly to trade in the 1.1050-1.1085 in the immediate aftermath of the vote.

The biggest loser of the day was the Swiss Franc, which suffered significant downside as investors unwound their positions of safety following Greece’s approval of the implementation of its austerity measures. This saw the GBP CHF rate pick-up from a multi-year low of 1.3263 yesterday morning to trade above the 1.3600 in early trading today. The USD similarly lost ground following the vote, with GBP USD holding above 1.6000 in yesterday’s European afternoon session.

Last night saw the release of relatively soft economic data in the Far East, which may dampen global risk appetite during today’s session. Chinese Purchasing Managers’ Index numbers for June showed that China’s key manufacturing sector grew at its slowest pace for 28 months last month. Japanese data released last night showed a larger-than-expected drop in annualised household spending in May, with a 1.9% contraction against analysts’ predictions of a 1.7% drop.

With Swiss and German PMI figures also coming in well below expectations this morning and a heavy schedule of data releases scheduled for today, including Eurozone and UK PMI figures, renewed downside is possible today for the GBP USD pair.


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