GBP falls, risk aversion knocks demand

Tuesday, 15 March 2011 13:36

GBP to EUR in fourth successive day of falls.

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The GBP to EUR rate is 0.216% lower on the day with 1 GBP = 1.1537 EUR.

Today sees the fourth straight day of declines for GBP to EUR.

The rate was seen dropping to a low of 1.1505 yesterday as money markets continue to scale back expectations that the Bank of England will raise interest rates.

The Euro also made strong gains against the majority of the 16 most actively traded currencies, as European Union finance ministers announced a deal to effectively bring a halt to the sovereign debt crisis.

With Europe poised to raise its benchmark lending rate in April, some peripheral economies are still struggling with recession, but news of the revamped bailout plan will be a source of encouragement to investors.

GBP was 0.3% lower against the Euro by midday in London and the UK currency may come under further selling pressure after falling through support at 1.1550.

Yesterday GBP to USD bounced back strongly, rising back towards 1.62 by the close of trading last night, as Fitch Ratings agency said that the UK should retain its top-rated credit rating.

The government's efforts to reduce the budget deficit have drawn worldwide acclaim, even though the extent of the cuts have increased unemployment and weighed on consumer spending.

UK government bonds rose for a third day in a row, as investors reduced bets that the Bank of England will raise interest rates over the coming months. Fitch Ratings said that the "principal risk" to the UK's credit rating is a weaker-than-expected economic recovery, though that's not "sufficiently material" to threaten the UK's AAA credit rating.