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Pound To Euro Exchange Rate Forecast : GBP EUR To Dip Following Successful Greek Bond Auction

November 13, 2012 - Written by John Cameron

Greece’s finances have once again stolen the limelight in the currency markets during today’s session. Whilst the eurozone’s finance minister continue their Brussels deliberations on whether to make the next tranche of €31.5bn of emergency bailout funding available to the heavily indebted Hellenic state, the troubled nation’s policymakers have set about securing just over €4bn of short-dated T-bills which will tide them over for the foreseeable future. In a flagrant example of ‘robbing Peter to pay Paul’, the funds raised at today’s auction will be used to pay off €5bn worth of longer dated Greek gilts which come to value on Friday.

In truth, it remains highly unlikely that the eurogroup of finance ministers will decide not to give a green light to Greece’s next batch of emergency funding – such an action would be akin to turkeys voting for Christmas, as it would plunge the euro area into a collective all-out debt collapse. Nevertheless, Greece’s unlikely success in finding bond market investors who are willing to pour several billion euros into their government kitty is an achievement in itself.
The news has caused the single currency to stage a comeback against the Pound following Sterling’s CPI inflation data fuelled rally of earlier. This has seen the GBP EUR exchange rate dip from its intraday high of 1.2546 to trade back down to close to the psychologically key 1.2500 level once more. Meanwhile, the euro has moved from 1.2661 up to 1.2726 against the US Dollar on the day.

The euros gains against Sterling since mid-morning would surely have been of a greater magnitude were it not for the latest German ZEW Sentiment index which showed at a disappointing -15.7 versus expectations of a -10.0 print. Any further near-term indicators which suggest that Germany’s economy is wobbling could hamper the single currency’s near-term improvement against Sterling.
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