Euro falls amid weakening business sentiment and strikes in Spain
30/Mar/2012 • Currency Updates•
Sterling rose against the euro on Thursday, helped by euro zone debt concerns in the run-up to struggling Spain’s budget. The pound also rose against the dollar though gains were limited after a fresh batch of soft UK economic data and it stayed well below a 4-1/2 month high hit earlier this week. Data on Thursday showed UK mortgage approvals falling unexpectedly, as well as a record monthly fall in money supply. As of yesterday, Sterling was up 0.15 percent against the dollar, pulling away from a low it hit the previous day after the gross domestic product data.
Eurozone finance ministers will today increase the size of their bond bailout fund to reassure markets that the region is secure. The EFSF will be boosted to 700 million euros and have pledged an extra 240 billion euros if required. This can be used until mid-2013, raising the combined firepower to 940 billion euros from 500. The draft agreement has been prepared for today’s meeting in Copenhagen. The move marks a concession by Germany who have been reluctant to pledge more for Eurozone bailouts. The draft states that if any new bailouts are necessary from July they will be handled by the ESM, which can lend up to 500 billion euros. The EFSF can lend up to 440 billion euros which has already earmarked Greece, Ireland and Portugal.
The Euro slid against the Dollar on Thursday as investors dumped the single currency, nervous about Spain’s budget presentation at the end of the week and ongoing concerns about the euro-zone sovereign debt crisis. Italian and Spanish bond yields were already rising on Thursday despite a broadly successful sale of Italian bonds, as investors switched into low-risk German debt.
The dollar has been volatile over the past 24 hours, and that is likely to carry on through the final hours of this trading week. Yesterday’s risk off trading day for equities, commodities and generally riskier currencies saw the British Pound prevailing against the dollar, despite a weaker London session. This trend has continued this morning and we have seen the dollar weaken further.