Pound rises vs euro but remains under pressure
20/Dec/2010 • Currency Updates•
The pound rose against the euro early Monday as euro debt concerns continued to grip the markets, but the UK’s exposure to this debt has kept the sterling under pressure and is expected to do so well into 2011. A lack of major economic events means that the direction of the pound is unclear.
The single currency sunk to a two-week lower versus the dollar on Friday as Ireland’s credit rating was cut by 5 points and sovereign debt worries continued to send investors elsewhere. Despite EU leaders coming to an agreement to tackle these debt problems through a permanent mechanism late on Friday, it is widely believed that there will still be a massive funding gap and that the euro will remain vulnerable for some time to come.
Safe haven demand for the greenback increased on the back of continued Eurozone debt crisis fears. Positive GDP and consumer spending data also helped the greenback to make gains. The dollar’s performance is likely to be dictated by the Eurozone until Thursday, which will see a spate of pre-Christmas US data.