GBP to EUR is having a good day courtesy of a stock market slump
- Created on Thursday, 18 August 2011 14:49
- Last Updated on Friday, 27 September 2013 14:55
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"We envisage only small movement in EUR/GBP, with little good news on the macro front."
Lately the EUR has been classed a risk asset courtesy of the financial troubles that continue to brew in Europe.
The UK has been a relatively quiet economy; stagnant but stable.
The result is the GBP has benefited at the cost to the EUR whenever things go tits up.
However, analysts at Barclays Capital caution that the current market crisis will not be as deep as that of 2008, hence the EUR should not loose too much ground.
"Near term, we expect the main European crosses to remain range bound. We envisage only small movement in EUR/GBP, with little good news on the macro front likely from the euro area and the UK. Nonetheless, a gradual resolution of the European crisis should support EUR/GBP in the medium term," say Barclays.
On the domestic data front it has been reported that UK wage growth accelerated to 2.6% in the second quarter, from 2.3% in the period through May, which reflected bonuses over the period. Basic salary increases, excluding bonuses, were little changed at 2.2%, underlining the squeeze on household incomes at a time when retail price inflation is 5%.
There were further concerns over the economy, but the majority of members decided that it was not appropriate to expand quantitative easing at this time, especially given concerns over inflation rising above 5% over the coming months. However, discussions on the subject will be ongoing and it is perfectly conceivable that the BoE will embark on further QE at some point this year.
The Pound initially fell sharply following the minutes and the unemployment data, but rose significantly through the course of the day, as risk sentiment continued to play a big part. Sterling peaked at 1.6570 against the U.S Dollar, the highest level in 14-weeks, while the UK currency also rose above 1.14 versus the Euro.