British Pound Sterling | Currency News Views and Outlook

British Pound Sterling: Currency falls back vs EUR and AUD on risk dynamics; quarterly inflation report awaits

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Category: British Pound Sterling

Published on Monday, 13 February 2012 09:49

Written by Sam Coventry

This morning market sentiment has driven the British pound lower against the commodity currencies and higher-risk currencies such as the euro. Looking at the latest spot exchange rates we see:

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British Pound Sterling (GBP) in Euro (EUR): GBP/EUR is 0.16% lower on the day at 1.1923. British Pound Sterling (GBP) in US Dollar (USD): GBP/USD is 0.32% higher at 1.5806. British Pound Sterling (GBP) in Australian Dollar (AUD) is 0.46% lower at 1.4701.

A short term fix to the Greek crisis was reached this weekend. It is worth noting though that the issue is certainly not resolved.

Looking at domestic issues concerning the British Pound we see that the Bank of England is due to release its quarterly inflation report on Wednesday.

"The inflation guidance may give a better understanding of policy direction in the coming months, while markets will also take note of the growth forecasts. Our UK economist expects the MPC will acknowledge that conditions have improved since the November report, but also that it stands ready to expand the QE programme should the outlook deteriorate again," says a morning foreign exchange rate note from UBS.

Elsewhere, the euro is back up towards its 2012 highs thanks to another step in the right direction for Greece.

"The euro looks likely to breach the $1.33 level this morning, in light of positive headlines from the Greek parliament. The second bailout, assuming it does eventually occur is nothing we believe will spark any longer-term or sustained rally for the euro, though it will surely give the euro some breathing space in the near-term," say Caxton Fx.

Economically, the danger signs are still there in the eurozone, with both German and French industrial production contracting last month.

The euro is trading just below $1.33 this morning and further upside direction looks a good bet here.