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Pound to Euro | Pound Euro Exchange Rate News and Insights
Euro to pound exchange rate forecasted to come under more pressure; sterling once again preferred to euro as Eurozone winds pick up
- Details
- Category: Pound to Euro
- Published on Friday, 22 June 2012 09:05
- Written by Sam Coventry
"Our conclusion is that it is crucial that investors regain some confidence in Spain, and consequently that demand for Spanish debt returns" - Chiara Cremonesi, UniCredit Bank in London.
UBS have this morning advised they are bearish on the euro to pound exchange rate. The currency pairing is at 0.8034 at 9:50 AM in London.
"The cross is under pressure; our focus is on 0.8012, a break below which would open 0.7972/51. Resistance is at 0.8111 ahead of 0.8163," say UBS. (We publish up-to-date fx forecasts on the pound euro pair on our IMT site, access is free via this Facebook entrance page).
It would seem that the pound sterling (Currency:GBP) is once again preferred to the euro on the basis of risk; the UK currency is seen as a port of safety whenever winds Europe pick up strength. Indeed, with the entire global economy looking rather dire the sterling is likely to outbid the euro.
"Generally yesterday was a very bad day in respect of economic indicators. We saw weak Chinese PMI for industry, slightly better-than-expected PMI data from Europe - but they were still basically very bad - and that indicates continued low growth/recession. Moreover, in the afternoon a series of bad figures were released in the US and Canada," says a morning FX note from Jyske Markets.
On the whole, the fears of the global growth have intensified and hence taken over from the debt crisis (the yields on Spanish government bonds have fallen somewhat and the bank stress test results released yesterday were not nearly as bad as feared).
Moreover, Moody’s downgraded 15 global banks last night – and the market did not react in any considerable way, but this is definitely not good news.
Spain remains a thorn in the side of the euro.
Over the last few days, Spanish government bonds (SPGBs) have been under unprecedented selling pressure as investors have become particularly negative on Spain.
While the central government financing position looks fine, regional finances represent a key risk, as the regions’ ability to access capital markets appears impaired, especially given the huge regional financing needs.
"In our view, it is not a realistic assumption that the central government takes over the burden of regional financing in an environment where demand for comes only from domestic sources (mainly banks) and is slowing down.
"Our conclusion is that it is crucial that investors regain some confidence in Spain, and consequently that demand for Spanish debt returns in a more structural way. At this stage, we believe that this will only happen following some decisive action at the EU level," says a Chiara Cremonesi at UniCredit Bank in London.
