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Posted September 27th, 2012 by Charles Purdy

GBP/EUR Rate & Comments for 27th September 2012

GBP/EUR – 1.2563

Sterling performed relatively well yesterday but struggled against the US dollar and Japanese yen as risk aversion was the main driver in the market. On the data front, the Confederation of British Industry (CBI) revealed that the volume of sales had increased by more than expected from last month, but, the reaction in the market was fairly muted. Today’s final GDP figures for the second quarter will be closely watched by investors with present expectations of a reading of -0.5% as per the preliminary figures. However, some are hoping for a revision upwards with some economists predicting an improved final reading of -0.2%. Any variation away from the expected -0.5% would cause some volatility for sterling whilst news from Europe will also play an important role. Please call in now for the latest news and rates.

The euro struggled yesterday as the markets fear that Spain will delay asking for a full sovereign bailout which in turn saw the yields on Spanish 10 – year bond rising back above the 6% level. The Spanish government stated that it will put off requesting for a bailout until borrowing costs become too high, despite stating that the Spanish economy was shrinking at a faster rate than expected. More bad news for Greece came as a general strike took place in the face of the increased austerity measures that are expected to be announced shortly. However, without these measures the Troika will not grant Greece the next tranche of its bailout meaning Greece would in turn default on its debts. The Italian benchmark 10-year bond auction today will be watched closely by investors. The news surrounding Greece and Spain, and in particular Spain’s draft budget plans which are announced today are likely to have a significant impact on the euro’s relative strength. Call in now for the latest update and rates.

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