Sterling To Euro Exchange Rate Drops As Greece Beats Debt Swap Deadline

Modified: Friday, 9 March 2012 08:39 BST - Written by David Woodsmith

STORY LINK Sterling To Euro Exchange Rate Drops As Greece Beats Debt Swap Deadline

The Sterling To Euro Exchange Rate is 1.1949.

As expected, Greece managed to convince over 75% of the private investors holding it’s bonds to accept a debt ‘haircut’ before the deadline which passed at 2000hrs last night. In truth, if the financial institutions had failed to agree to the debt swap, it would have been tantamount to turkeys voting for Christmas, as the contagion which would follow a disorderly Greek default would have had a devastating effect on the whole of Europe’s banking sector.

The euro was well-bid during yesterday’s session, as market participants correctly predicted the positive outcome to Greece’s debt-swap stand-off. The European Central Bank opted to maintain its key lending rate at 1.00% yesterday afternoon, as anticipated. However, ECB President Mario Draghi’s comments in his monthly press conference, which followed the announcement, were more of a surprise. Draghi was extremely upbeat about the second Long-Term Re-financing Operation, which saw €528bn of newly created, ultra-cheap loans, made available to Europe’s banks last week. The ECB President stated that the global ‘risk environment has improved enormously’, since LTRO2.

Elsewhere, the Bank of England and the Bank of Canada both maintained their interest rates at 0.50% and 1.00% respectively, as expected. There was some relief from investors holding Sterling-denominated assets, that the BoE resisted the temptation to up its QE programme from its current £325bn level. Any such move would have caused a shift out of the Pound.

Market babble ahead of today’s session is centred on this afternoon’s key US Non-Farm Payroll figure for February. January’s counterpart number showed that a healthy 243,000 new jobs had been created in the non-farming sectors of America’s giant economy. If February’s number beats 243,000, then markets participants are likely to be tripping over eachother in order to liquidate their positions of safety ahead of the weekend close. This could see the GBP USD exchange rate make a renewed run at the key psychological barrier at 1.6000.

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