Pound Euro Exchange Rate Tumbles To 5 ? Month Low In Spite Of Bundesbank GDP Warning

Published: Monday, 22 October 2012 18:00 BST - Written by Toni Johnson

STORY LINK Pound Euro Exchange Rate Tumbles To 5 ? Month Low In Spite Of Bundesbank GDP Warning

Risk remained well and truly off the menu during today’s session, thanks to ongoing concerns regarding tensions in the Asian economy. Data released earlier today revealed that Japanese exports to China had tumbled by an annualised 10.3% in September thanks to a boycotting of Japanese products and services by Chinese citizens in protest at Japan’s territorial claim over the disputed Diaoyu Islands, which triggered a bitter political standoff between the policymakers of Asia’s two leading economies last month.

Elsewhere, the GBP EUR exchange rate has continued to test lower in spite of a downbeat assessment of Germany’s economic situation by the nation’s central bank earlier today. The Bundesbank issued a report earlier today which warned investors that economic activity in the giant Teutonic economy may contract slightly during the last three months of 2012. In spite of this disappointing development, the GBP EUR exchange rate still managed to break down to its lowest level since the start of May at 1.2247. July’s visit to the high 1.2800s is now a distant memory and the pair now appears to have been massively over-bought at these rates.

The above developments apart, there was relatively little price action for the world’s major currency pairs during today’s session. Tomorrow brings a series of key risk events which could easily change this. The most important of these comes in the guise of the Bank of Canada’s latest policy decision. BOC Governor Mark Carney has been touting a potential interest rate rise for the whole of this year and the majority of 2011. However, his bank has up to this point resisted the temptation to go against the grain of the rest of the world’s central banks and move to tighten monetary policy. Analysts are anticipating a ‘no change’ decision from the BoC, so if the Bank’s policy committee decides to jump on this summer’s jump in crude oil prices in order to move domestic rates higher, then the GBP CAD exchange rate is likely to tumble in the near-term.

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