Sterling sees 5-month lows versus dollar ahead of Greek vote

Tom Tong28/Ιούν/2011Currency Updates


The pound fell to near five-month lows against the dollar yesterday as an increase for the safe-haven currency soared amid worries over the European debt crisis ahead of a key Greek vote on reforms required for further aid.

The pound also lost ground against the euro, with the single currency gaining respite from a bought of ‘short-covering’ and the prospect of a silver lining ahead as a plan to make private bondholders share the burden of Greek debt emerged. Nevertheless, investors are expected to remain on edge today and all eyes will be on today’s Greek Parliamentary vote on the new austerity measures required as a pre-condition for new bailout funds.

Another focal point today will be the BoE’s final print of Q1 GDP, which is likely to confirm that Britain’s economy only managed 0.5% growth. It is unlikely that the BoE will start hiking rates until 2012 without a significant growth results for Q2 and Q3. With this in mind, Money markets are now pricing a rate rise for mid-2012, where previously rates were expected to rise by three-quarters of a percent by the end of 2011.


The euro strengthened against the pound and dollar during Monday trading, helped by signs of progress on a scheme to make private bondholders share the burden of any Greek debt solution which in turn started a bout of short covering. Today’s focus will be on Greek lawmakers, who will be voting on the budget cuts necessary to prevent the currency union’s first default. The market is extremely nervous ahead of today’s vote on austerity measures with Greek Prime Minister George Papandreou calling on Lawmakers to back the tough austerity plan in order to meet the proposed 78 billion euro cuts and asset sales which comprise the five year budget plan and will ultimately avoid default. The euro may experience further gains if these austerity measures are passed and we see any indication of the interest rate hike in July the market is currently anticipating.


The US dollar saw an uninspired day’s trading against the majors due to a lack of economic data to fuel the markets. Yesterday the only data releases were core PCE price index, which came in marginally better than expected at +0.3%, personal spending data, which was flat, whilst personal income rose slightly less than expected at 0.4%. The dollar closed the day more or less unchanged against the pound after the sterling had seen near 5-month lows against the dollar during trading. Meanwhile the dollar dropped by over 1.1% against the euro. This was more down to euro strength gained by the potential Greek bailout being agreed. The main dollar focus today will be on the CB consumer confidence reading, expected to come in at 68.


Written by Tom Tong

Vestibulum id ligula porta felis euismod semper. Donec ullamcorper nulla non metus auctor fringilla. Cras justo odio, dapibus ac facilisis in, egestas eget quam. Morbi leo risus, porta ac consectetur ac, vestibulum at eros. Donec ullamcorper nulla non metus auctor fringilla.