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Posted November 24th, 2010 by Charles Purdy

EUR/GBP Rate & Comments for 24th November 2010

EURO/GBP1.1850

Sterling hit a 2 month high against the euro yesterday of €1.1836/£1 as fears that the debt crisis could spread left investors selling the euro. The risk of ‘contagion’ (i.e. other countries in the region joining Ireland and Greece in needing a bailout) saw a resurgence in ‘risk aversion’ where investors look to buy safe haven assets and avoid losing money. As a result, sterling lost out to the US dollar, slipping to the lowest level in nearly 4 weeks as fears over European debt and also the North Korean shelling of South Korea left many investors running to US bonds – traditionally the safest asset globally. In terms of data, mortgage approvals came in roughly as expected, with the big news out tomorrow in the form of the revised GDP figures for the 3rd Quarter. The initial estimate showed 0.8% growth when it was released a few weeks ago, which was better than expected. Any change to this number is likely to see volatility so call in now for a live exchange rate.
 
In the Euro zone, with the markets in a holding pattern awaiting details of the planned Irish bailout, the euro dropped further yesterday following negative comments from key individuals and uncertainty over the Irish political situation. German Chancellor Angela Merkel said Ireland’s crisis left the euro in an “exceptionally serious” situation. In addition, German Finance Minister Wolfgang Schaueuble said that the future of the euro was at risk due to the Irish crisis. The Euro zone is in a bad way, with many investors looking more closely at Portugal and Spain which are by all accounts next in the firing line for a debt crisis. Out later today, there is Italian retail sales data so ensure you get in touch sooner rather than later to avoid missing out.

 

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