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Exchange rates today: EUR in a 'double-dose of upside' as EURUSD moves up to 1.2759

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Category: Money Transfer UK

Published on Tuesday, 17 January 2012 09:37

Written by Will Peters

The euro however now faces the very real prospect of a Greek euro exit / default.

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The euro exchange rates are on the ascendency. The EURUSD has recovered recent losses, and the pound euro exchange rate has fallen.

GBPEUR is at 1.2043.

"The euro experienced a double-dose of upside during the Asia session. First, Japan’s Finance Minister Azumi raised the possibility of intervention in EURJPY, but said he has not yet made a decision on the matter. We see the immediate intervention risk as remote, but investors were in no mood to take chances," says a morning exchange rate note from UBS.

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Elsewhere on the exchange rate markets, China’s Q4 GDP growth then came in stronger than expected, boosting the euro and taking AUDUSD briefly through 1.04.

Earlier, a senior official at S&P ratings said in an interview with Bloomberg TV that he expected Greece to default soon.

The EFSF was also downgraded one notch to AA+.

"With troika officials descending upon Athens this week, it is clear the stakes are being raised and there may be some need for contingency planning ahead. We continue to envisage coercive action by Greece, and while reports suggest that retroactive collective action clauses will be put into use, with the troika’s blessing, the Eurozone authorities would want to ensure such action remains a one-off," says Gareth Berry at UBS.

The market managed to absorb the ratings news with relative ease, as France launched a successful bill auction where the one-year yield actually fell.

However, Portugal may prove to be a bigger worry in the short term, as it now holds junk status with all three major ratings agencies, which may have caused the country’s paper to drop out of bond indices.

The forced liquidation of real money holdings has led to a sharp rise in yields, though in the past few weeks the European authorities and IMF have continued to view the country’s programme as on track.

CPI figures are due in the UK and Eurozone, and the German ZEW is also out. We have revised our short-term FX forecasts and continue to target a stronger dollar – our 3m EURUSD view is now at 1.15.