The Euro came out of a four day decline against the Dollar as the German economy grew at the fastest pace in two years which, according to experts, could act as a catalyst for Euro gains.
Pound Sterling – UK Markets
Poor consumer confidence continued to affect house prices. Whilst continued low interest rates are aiding our record deficits we are still in a period of uncertainty. With the Bank of England predicting inflation will remain below target over the medium term, the door is open for further quantitive easing. The outlook for the rest of the year would appear to be rather stale.
As of GMT 1200 the GBP/EUR rate stands at 1.21710 whilst the GBP/USD is down at 1.5589.
US Dollar – US Markets
We continue to perceive the Dollar as a safe haven for investors even in the midst of the panic surrounding the economic slowdown. Poor data persists as jobless claims continued to increase,which further highlights weakness in the market.
Euro – European Markets
The Euro continued to lose ground yesterday as worries grew over European government debt. This, coupled with an unexpected drop in industrial production, raised concerns over the health of the economy.
Further pressure was placed on the currency after Greece suffered a 1.5% decline in GDP through the second quarter. With experts only predicting a 1% drop, this came as a shock to markets and consequently put pressure on the Euro.
However the weaker Euro has been welcomed by Germany whose economy grew by a record 2.2% in the second quarter. This has been fuelled by the booming export market, which appears to have rubbed off onto other European countries such as France and Spain, who also recorded a period of sustained growth.
The single currency dropped 2.5% against the Dollar and stayed relatively low against the Pound throughout the course of the day. As of GMT 1200 the EUR/USD rate was 1.2805.
Other Currencies – Highlights
Fears continued in Japan over the strengthening of the Yen. A strong Yen dramatically affects the export market, which is the key driver of the local economy. The government is now due to step in and take action over the state of the currency.
The commodity linked Canadian Dollar also clawed back some ground against 15 of its 16 major counterparts and surprisingly outshone others tied to growth, such as the Australian and New Zealand Dollars.
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