Euro Continues To Slide Against Sterling

11 July, 2012

Simon Eastman

Yesterday we saw the Euro drop to fresh 3 and a half year lows against the pound as the markets returned their focus to the Euro zone debt crisis. Helping the cause were comments by Italy’s Prime Minister Mario Draghi who commented that Italy might need to tap into the EU fund pot for bond support just like Greece and Spain. This follows a late night EU minister meeting on Monday which failed to come up with any solutions to try and stem the soaring Italian and Spanish borrowing costs. Throw into the pot the upcoming German constitutional court ruling which may put a halt to the plans to dish out rescue funds and the Euro is looking pretty shaky.

A gloomy outlook for the Euro but we must remember the UK isn’t doing too well either. In the midst of recession, further QE just administered and Mervyn King the Bank of England governor doing his best to thwart the rise of the pound to Euro exchange rates by stating the British economy is showing little signs of recovery (such negative comments we have seen many times in the past as a strong Pound makes exports to Europe more expensive so anything to try and curb the rise is in the best interests of growth).

Against other currencies the pound didn’t fare as well after poor retail sales figures and housing data. The only reprieve was some better than expected production figures but on the whole the figures showed a fragile economy here in the UK. “Overall the news from the UK is very negative and sterling is still very vulnerable,” said Ian Stannard, head of European FX strategy at Morgan Stanley.

With this in mind, anyone looking to buy currency other than the hard hit Euro should bear this in mind and keep in touch with your broker to make sure you don’t miss any short lived buying opportunities the markets may throw up.

For anyone looking to send money to the Czech Republic it’s worth noting that over the past three months the pound has gained over 7 percent against the Krona! On a 2.5 million Krona property purchase this makes a staggering £6500 difference to the cost. Well worth a look at the potential investment opportunities there are with those kind of savings!

Today will again be all about the Euro, with no UK data out today there are some releases from Italy and France this morning followed this afternoon by a 6 month bill auction in the US and a speech by one of the Fed’s key members. Tomorrow is a much busier figures day with Industrial and Manufacturing production figures along with a GDP estimate from the UK and import/export data from across the pond.