GBP EUR Exchange Rate Dips, US Dollar Investors Await Michigan Confidence Survey

Published: Friday, 12 October 2012 10:00 BST - Written by Tim Boyer

STORY LINK GBP EUR Exchange Rate Dips, US Dollar Investors Await Michigan Confidence Survey

The Pound has lost further ground against the euro during the overnight session, sending the GBP EUR exchange rate down to 1.2364. The firming of the single currency following yesterday’s ECB Monthly Report yesterday has continued, sending the euro higher against both the US Dollar and Sterling. Support for the EUR has come in spite of yesterday afternoon’s revelation that four leading German think tanks have found that the giant Teutonic economy is in danger of sliding into recession. The four policy centres cut their forecasts for 2013 German growth forecast from 2% down to 1%, blaming the downgrade on the sapping effect which supporting the European Central Bank’s bond purchase programme will have on the eurozone’s leading economy. It appears possible that this gloomy prediction from the euroland’s leading economic power may weigh heavily on the single currency during the remainder of this week’s session.

Elsewhere, London’s FTSE 100 has opened up down by around a quarter of a percentage point on the day. The past ten days have seen world stock markets testing lower, during a period of the year which traditionally brings a forward move for equities following the quiet summer period. The generalised shift away from risk-based assets by equities traders suggests a broad lack of confidence in the extraordinary monetary policy measures which have been announced by the world’s central banks in recent months. These policies, including more QE from the Bank of England and Federal Reserve and the European Central Bank’s bond purchase scheme, are designed to drag the global economy up off the floor by its lapels. The trouble is, they do not appear to be working. The latest Michigan Confidence survey, due for release this afternoon, will have further determine appetite for risk. The survey is expected to show a dip in the reading of this key barometer of US confidence. Such a print would be likely to see the US Dollar well-supported in the near-term.

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