GBP to EUR Exchange Rate Teeters On The Edge Ahead Of Big Vote; Is Cyprus Euro Exit On The Cards?

March 22, 2013 - Written by Frank Davies

STORY LINK GBP to EUR Exchange Rate Teeters On The Edge Ahead Of Big Vote; Is Cyprus Euro Exit On The Cards?

The waiting game continues. The eurozone’s policymakers have been making public comments throughout this afternoon’s session, as market participants await news from Cyprus. Spain’s policymakers have been at the front of the queue to pass comment on the situation, perhaps because of the Iberian nation’s ongoing struggle with its own fiscal position. The Spanish Economy Minister Luis de Guindos, has had plenty to say; de Guindos has recent experience of the consequences which unmanageable levels of indebtedness can cause, following his time working for fallen investment bank Lehman Brothers, who were one of the earliest and largest casualties of the 2007 contraction in the global credit markets.

De Guindos was firm in his calls for Cyprus to remain a part of the eurozone, stating the other sixteen nations in the single currency bloc are united in wanting to maintain the tiny Mediterranean island as part of the euro area. He went on to state that the ball was in Cyprus’s court and that the EU were waiting on a tangible plan from Cypriot lawmakers before providing their assent for a €10bn bailout.

Meanwhile, De Guindos’s words were backed-up by Spain’s Deputy Prime Minister Soraya Saenz, who emphasised that her country remained 100% committed to meeting its own stringent deficit target. There was more positive news for the single currency this afternoon when it emerged that the yield that Italy is having to pay on its 10 year bonds has edged lower by 9 basis points to 4.48% today. It appears that the level of fear regarding Italy’s political vacuum is dying down – a fact which also benefits the single currency.

Investors liked what they heard from mainland Europe this afternoon and the euro has improved against Sterling as a consequence, sending the GBP EUR exchange rate (currency : GBP/EUR) briefly back below the psychologically key 1.1700 level earlier. Good news from Cyprus ahead of Monday’s deadline, imposed by the European Central Bank, for a workable bailout plan to be put forward from the nation’s policymakers, would surely see the single currency register further gains.

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