Investors Favour The Euro
12 October, 2012
The movement came as Standard & Poors downgraded Spanish credit to BBB which is a level just above “junk” status. But investors viewed the downgrade as a sign that it was more likely Madrid would be asking for a bailout sooner rather than later. As we have seen recently when the Euro gains the dollar loses out so despite losses against the Euro the pound made some ground back against the dollar.
“The euro is holding up relatively well as now people are taking it (the downgrade) as a positive because Spain might be closer to asking for a bailout. It’s perverse but the logic is they need to take a step back to go forwards,” said one broker.
A bailout request would be seen as positive for the more riskier currencies, of which the Pound and Euro are both viewed as, so with things moving in this direction we should expect the GBP/EUR pair to remain around the levels we are at or possibly move lower. The Dollar could well weaken further, a good thing for those individuals looking to buy there or for businesses who settle invoices with the greenback but for anyone looking to buy in Europe be aware that although we have seen the exchange rates much higher in the past months holding out for a return could leave egg on your face if a bailout brings with it the expected Euro strength.
As with Thursday, Friday is fairly quiet on the data front for the UK although we do have a speech from Bank of England deputy governor Paul Tucker. From Europe there are a few releases with CPI from Italy, French current account data and EU industrial production while Spain has a national holiday. Across the pond there’s industrial production, PPI inflation figures, consumer sentiment data and a speech from Lacker of the Federal Reserve to round things off. Keep in touch with your broker at Currency Index to ensure the day’s events don’t catch you out with your upcoming transfer.
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