Pound surges from strength to strength as Euro wanes

The Pound is still running with the positive sentiment brought by last week’s budget and also benefiting from European woes. The mid market rate against the Euro at 10am this morning was the near best in eighteen months at 1.2334. Speak with your broker to take advantage of or protect yourself from the rates today if you have Euros to transfer.

Euro – European Markets

The Euro has traded near to the lowest levels against the Pound since 2008 and is also at record lows against the Swiss Franc. Markets are avoiding the Euro this week as funding concerns come to the fore. On Thursday, European banks have to repay 442 billion Euros to the ECB causing a potential liquidity shortfall of 100 billion Euros. There is also concern that regional banks will have to borrow at higher interest rates once they roll over loans this week. France and Spain both have debt auctions later this week, following weak demand for Italy’s own auction.

Pound Sterling - UK markets

The Pound is continuing the upwards climb that began with the emergency budget one week ago. Andrew Sentence, the Bank of England policy member, who voted against the rest of the committee for an interest rate rise last week has made further comments which have helped maintain the Pound’s momentum. He has suggested that despite the emergency budget interest rates should rise to deal with inflation. Sterling is also the beneficiary to the markets’ current avoidance of the Euro due to risk aversion.

US Dollar – US Markets

The US Dollar is making strong gains on the Euro. Although the Dollar clawed back some ground against the Pound over night it has started to drop again this morning. Standard Chartered PLC has lowered its forecasts for the US Dollar versus the Yen and the Swiss Franc following a US report yesterday that revealed inflation remains muted. This is also due to the G20s decision over the weekend to focus on budget cutting despite the US’s preferred approach of spending stimulus.

Other Currencies – Highlights

The Japanese Yen has risen to a seven week high against the US Dollar and a three week high against the Euro on signals that the global recovery is slowing down. The New Zealand Dollar has deteriorated in response to a negative set of housing data that revealed the amount of home building approvals declined.