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Posted May 6th, 2010 by Charles Purdy

EUR/GBP Rate & Comments for 6th May 2010

EUR/GBP – 1.175

Sterling was very much caught in the middle yesterday as concern over the Euro zone debt crisis caused the pound to jump to a 9 month high of 1.1770/£1 against the euro, but fall against the US dollar to hit a 5 week low of $1.5068/ £1. Fears that the debt crisis would spread to other European countries made sterling a relatively better investment than the euro, and with the polls opening today, the pound suffered against the US dollar as the latest opinion polls showed that no party had a clear majority going into the election. The US dollar strengthened as investors bought into the perceived relative safety of the US currency ahead of the uncertainty of the UK polls. One analyst stated that in order to see a large gain against the US dollar, we would need to see a sizeable Conservative majority on Friday morning. Data out today did show that the UK construction sector is recovering at a better rate than expected, but this did little to help the pound stabilise against the US dollar. The big news today is clearly the election and the Greek situation. Expect volatile trading against the US dollar off the back of the first exit polls later in the afternoon and continued volatility throughout the day against the euro. Call in now if you need to buy currency over the next few days as tomorrow could be more than interesting on the currency markets after the election.

In the Euro zone, the euro had a terrible day yesterday tumbling to a 9 month low against the pound and a 14 month low of 1.29/ $1 against the US dollar – over a 1% drop against the American currency. The drop was as a result of a sharp fall in sentiment towards the region as a whole as fears of ‘contagion’ – i.e. the spread of the debt crisis from Greece to other nations – left investors selling the single currency. Portuguese bonds came under fire as credit rating agency Moody’s lined up the country for a possible credit rating downgrade. Aside from this, there was little fundamental data out today. Some analysts have predicted rates of 1.20/$1 in the coming months as the disparity between the USA and the Euro zone widens. Get in touch now to look at fixing prices in and avoiding any adverse movements impacting on your payments.

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