Foreign Exchange Report : Market Anxiously Awaits Eurozone Debt Summit as GBP EUR Rate Slips on Dovish Bank of England Minutes

July 21, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Report : Market Anxiously Awaits Eurozone Debt Summit as GBP EUR Rate Slips on Dovish Bank of England Minutes

The Pound Euro exchange rate (GBP EUR) is 1.1336. The Pound Dollar exchange rate (GBP USD) is 1.6174. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5071.

The major news story in the currency markets today is likely to be the emergency meeting of Eurozone leaders which starts in Brussels at midday UK time.

The major topic for discussion at the meeting will be Greece’s ongoing debt crisis and the possible effects of any contagion if Greece defaults. European leaders have downplayed the potential for a ‘fix-all’ solution coming from the summit, with German Chancellor Angela Merkel stating that today’s meeting would be a ‘small step’ towards reaching a resolution.

Any comments emanating from the meeting which suggest that European policy-makers are considering a ’roll-over’ of the term of Greece’s existing debt would be likely to weaken the Euro, due to recent comments by S&P and Fitch stating that they would view such an action as a selective default.

Reports suggest that the ECB and Eurozone leaders are keen for private investors to foot the bill for a second Greek bail-out and one way of achieving this without causing Greece to default might be to introduce a tax on European banks’ profits. If reports coming from the summit suggest that this option is being discussed, the Euro may find some support in the markets.

Elsewhere, the Bank of England released the minutes of its July Monetary Policy Committee meeting yesterday and they were of a generally dovish tone, causing some downside for the Pound in the markets. The minutes revealed that the Bank is expecting some softening in UK economic activity in the third quarter of 2011, leaving little scope for a near-term interest rate rise. The minutes also called for further consideration of an extension to the £200bn that the UK has already committed to its Quantitative Easing programme if the British economy ’continues to shows sign of weakness in the next few months’.

The Bank’s statement saw the GBP EUR rate trade down to 1.1323 overnight, rejecting Monday’s six-week high of 1.1487. Further downside is possible before the weekend if the noises emanating for the Eurozone summit are positive.


For other live currency exchange rates and a currency converter see the currency news website.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Daily Currency Updates Euro Forecasts Pound Euro Forecasts Pound St Forecasts