Pound Euro Exchange Rate Slips As Greece Votes For New Austerity Package

November 12, 2012 - Written by David Woodsmith

STORY LINK Pound Euro Exchange Rate Slips As Greece Votes For New Austerity Package

A light day for data releases hasn’t stopped Sterling putting in a dismal performance in the markets. The Pound has lost ground against nearly all of the other sixteen most-actively traded currencies, including the euro, on the session.

Broad Sterling weakness helped trigger the move lower on the day for GBP EUR, however the main contributory factor in the pair’s shift from above 1.2500 down to 1.2467 emanated from Greece, where the debt-troubled nation’s parliament was voting on a new package of austerity measures. This morning’s decision in favour of €9.4bn of new cuts means that the de facto bankrupt state will now qualify for its next tranche of EU/ECB/IMF emergency funding. Good news for investors holding euro-denominated assets.

On a not so positive note, official government figures released earlier today revealed that Asia’s second largest economy contracted in the third quarter. The 0.9% dip in Japanese economic activity was expected. However, following Q2’s contraction of 0.3% things are looking bleak for the trade-driven economic superpower.

Tomorrow’s major risk event comes in the form of the latest UK CPI inflation figures. The British price rise data is particularly closely-watched, as it forms the basis of the UK government’s monetary policy target which it imposes upon its ‘independent’ central bank. If the figure shows at an annualised rate of above 2.0%, then BoE Governor Mervyn King will once again be forced to write a letter of explanation to the Chancellor of the Exchequer. Analysts are anticipating an increase to September’s annualised print of 2.2%. Anything significantly north of this number would see the talk of a near-term extension to the Bank’s QE programme die down, affording the Pound some much-needed breathing space.

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