The pound has been gaining against the Euro as markets continue to focus on the debt situation in Greece. Interbank has been testing the 1.1600 area, making it a much better opportunity for clients interested in purchasing the Euro to secure a rate of exchange.
The Euro is likely to remain under pressure as the week progresses, the European Central bank are due to hold their monthly policy meeting on Thursday – no changes to interest rates are expected, however markets will be watching the accompanying press conference closely for any indication of a softening of tone.
The Bank of England are due to hold their monthly meeting on Thursday, again no changes are anticipated, however there have been recent indications that policy makers are moving towards further QE/monetary support. Markets are forecasting that at least two more members of the monetary policy committee may decide to join Adam Posen in voting for further stimulus through additional quantitative easing. As usual we will have to wait until mid October before the minutes of this meeting are released.
Clients interested in purchasing Euros from Sterling are advised to consider securing a rate of exchange, or to consider placing a protective stop order in the market to protect against a reversal.
The Euro has experienced its worst quarter against the Dollar and the Yen in just over a year over increasing concerns that European leaders may not be able to contain the region’s debt crisis and Greece may default on its debt.
The 17-nation currency has slumped against the US Dollar even after Standard & Poor cut its US debt Rating and the Fed set additional economic stimulus. Dropping towards an overnight 8-month low of 1.3314 from a high of 1.4502 last achieved on 30th June.
The Euro is being weighed down by the recent announcement from the Greek government that it will miss this year’s deficit target. The Euros deterioration versus the dollar has also pushed the single currency lower against the Pound.
The markets are likely to continue to remain cautious and risk-averse throughout trading this week – and depending on the outcome of economic data releases, this situation could continue to aid the US Dollar and other safe-haven currencies.