New Eurozone fears push Pound higher
8 May, 2012
Despite yesterday being a Bank Holiday in the UK, there was a lot of movement in the currency markets as investors lost confidence in the eurozone after Greek and French elections cast doubt on politicians’ commitment to austerity plans aimed at tackling the debt crisis.
The euro hit a 3 month low against the dollar and a 3 ½ year low against the pound and many traders felt that these losses could be extended over the coming days.
In Greece the failure of the two main parties supporting the country’s international bailout to secure a parliamentary majority threw into question the future of the programme and potentially Greece’s membership of the euro.
In France Socialist Francois Hollande, who has championed a longer time-frame for eliminating the deficit, ousted centre-right incumbent Nicolas Sarkozy in a result that could start a push-back against German-led austerity across the euro zone.
“The reaction in the foreign exchange market shows if it really comes to the point where it’s clear European politicians will step back from austerity measures that will be perceived as very negative by financial markets,” said Lutz Karpowitz, currency analyst at Commerzbank.
On Friday we had the all important US jobs figures which cast further doubt over the US economy’s recovery. Non farm payrolls data for the month of April showed only 115,000 jobs were added, well below the forecast of 170,000. The pound pushed on against the dollar making sending money to the USA cheaper, and though the UK slipped into recession last week its seems investors are more concerned about issues in the eurozone and US so Sterling remains well bid across the board.
Today is fairly quiet in terms of economic data releases with German Industrial Production the only data of real note. Having said that there are a number of speakers throughout the day and its is often the analysis of these comments that can affect the currency markets so don’t be surprised if we have a volatile day in the markets.
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