Pound To Euro Rate Eases Following Successful Spanish Bond Auction

Modified: Tuesday, 21 August 2012 20:47 BST - Written by Ben Hughes

STORY LINK Pound To Euro Rate Eases Following Successful Spanish Bond Auction

Yesterday afternoon’s standout data release came in the form of the latest Retail Sales numbers in the US. Analysts were anticipating the July figure to show an increase from June’s dismal print of -0.3% and they weren’t disappointed. The shop sales number showed a healthy increase of 0.8% last month – well ahead of estimates of a 0.3% uptick. The encouraging US release was the latest in a line of improved American data sets, following on from the latest Non-Farm Payrolls number from earlier this month, which thrashed expectations. As is invariably the case, yesterday’s strong US data spelled bad news for the safe-haven US Dollar. This sent the GBP USD exchange rate through the 1.5800 level for the first time in several weeks as the European equities session drew to a close.

Elsewhere, it was a broadly positive day for the euro, as Spain’s latest bond sale went well. The debt-burdened Iberian state managed to shift a full €4.4bn allocation of short term debt at lower interest rates than the previous auction. However, it was far from plain sailing all the way for the single currency. The day was marred for the euro by the release of further economic data which suggested that the eurozone’s wealthier northern states are beginning to creak under the burden of supporting the region’s de facto bankrupt southern states. Whole of eurozone GDP data revealed that economic activity had contracted by 0.2% in the three months to the end of June. This hardly came as a surprise to investors; the latest edition of Germany’s ZEW Sentiment Index provided more cause for genuine concern, coming out much worse than economists had anticipated. When the euphoria of Spain’s successful debt sale wears off, market participants’ memories may linger on this weak German print. Things could still get much, much worse for the single currency.

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