Sterling hit a 2 month high against the euro yesterday of €1.1836/£1 as fears that the debt crisis could spread left investors selling the euro. The risk of ‘contagion’ (i.e. other countries in the region joining Ireland and Greece in needing a bailout) saw a resurgence in ‘risk aversion’ where investors look to buy safe haven assets and avoid losing money. As a result, sterling lost out to the US dollar, slipping to the lowest level in nearly 4 weeks as fears over European debt and also the North Korean shelling of South Korea left many investors running to US bonds – traditionally the safest asset globally. In terms of data, mortgage approvals came in roughly as expected, with the big news out tomorrow in the form of the revised GDP figures for the 3rd Quarter. The initial estimate showed 0.8% growth when it was released a few weeks ago, which was better than expected. Any change to this number is likely to see volatility so call in now for a live exchange rate.
In the Euro zone, with the markets in a holding pattern awaiting details of the planned Irish bailout, the euro dropped further yesterday following negative comments from key individuals and uncertainty over the Irish political situation. German Chancellor Angela Merkel said Ireland’s crisis left the euro in an “exceptionally serious” situation. In addition, German Finance Minister Wolfgang Schaueuble said that the future of the euro was at risk due to the Irish crisis. The Euro zone is in a bad way, with many investors looking more closely at Portugal and Spain which are by all accounts next in the firing line for a debt crisis. Out later today, there is Italian retail sales data so ensure you get in touch sooner rather than later to avoid missing out.
In the USA, the debt crisis in Ireland saw investors flocking to the US dollar as an investment. In addition, breaking news throughout the day showed that North Korea had launched an artillery attack on a South Korean island. The threat of conflict left investors spooked and saw the US dollar gain by 3.5% against the South Korean won. US GDP was revised upwards from 2.3% to 2.5% which also helped. Out today there is US unemployment claims figures and new home sales figures so get in touch now to prevent market movements impacting your payments.
Elsewhere, with the England cricket team the favourites heading into their defence of the Ashes ‘Down Under’, sterling had a strong day against the Australian dollar gaining 0.5% and hitting a high of $1.6286/£1 as investors pulled out of riskier assets.
EURO/GBP – 1.1850
US$/GBP – 1.5775
CHF/GBP – 1.5744
CAN$/GBP – 1.6101
AUS$/GBP – 1.6142
ZAR/GBP – 11.22
JPY/GBP – 130.89
HKD/GBP – 12.23
NZD/GBP – 2.072
US$/EURO – 1.3303
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1 Comment
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Very interesting, thanks for that
