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Posted October 18th, 2012 by Charles Purdy

GBP/EUR Rates and Comments for 18th October 2012 – Sterling slips to 1.2285 against the euro

GBP/EUR – 1.2304

Sterling struggled yesterday, dropping to 1.2285 against the euro in the early hours of Wednesday morning due to the euro’s increasing strength amidst rumours of an impending Spanish bailout and Moody’s (one of the big three credit rating agencies) confirmed Spain would keep its investment grade credit rating. Whilst sterling struggled due to an increase in global risk appetite, it continues to rise against the US dollar and the Japanese yen. The latest meeting minutes from the Monetary Policy Committee (MPC) revealed that all 9 members voted to keep interest rates and quantitative easing on hold as was widely expected. Unemployment data released yesterday was particularly upbeat with 4000 less people applying for unemployment benefits during the past month and the overall unemployment rate dropping by more than expected to 7.9%. Retail sales data released today, which measures the rate of consumer spending, is expected to show a marginal increase of 0.4% up from last month’s 0.2% drop. Whilst the retail sales figures will be watched closely by investors, any news from the EU Economic Summit is likely to have a much bigger impact on sterling’s strength, so please call to discuss expectations with your trader and for a live price.

The euro performed well yesterday, strengthening to a one month high against the US dollar of 1.3120 and peaking at 1.2285 against sterling before weakening off slightly as the day progressed. This shift can be largely attributed to Moody’s (one of the big three credit rating agencies) announcement that Spain was keeping its investment grade credit rating which eased concerns surrounding the country and the region in general. The EU Economic Summit starts today, where the heads of state will meet to discuss plans to create a closer fiscal union as well as discussing the on-going problems surrounding Greece and Spain in particular. Any news leaked from these meetings could cause a lot of volatility in the markets; furthermore, the markets will also focus on the benchmark 10-year Spanish bond auction as the EU Summit and Moody’s announcement draws more attention to it than normal, so call in now for the latest news and changes in the euro rate.

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