Pound at close to one-month highs against euro

Publication date: 27 June 2012
Author: Mark Bolsom, Travelex

The pound rose close to one-month highs against the euro on Tuesday and very nearly made an attempt at May’s record peaks after borrowing costs for Spain soared at a short-term bond auction putting Madrid one step closer to bankruptcy. However, sterling is already coming under pressure this morning after yesterday’s comments from the Bank of England regarding a potential interest rate cut which has put the pound’s longer-term outlook at serious risk.

Cable is also trading higher following yesterday’s disappointing US consumer confidence data which has raised more question marks about the health of the economy. Investors holding out for another move higher from here could be left disappointed with last minute position taking before tomorrow’s EU summit likely to favour the safe haven US dollar and yen.

Chancellor Angela Merkel warned investors yesterday that Germany will not share Europe’s debt burden as long as she is alive. The statement is far from encouraging heading into Thursday’s EU gathering. Expectations around what stops eurozone leaders are prepared to pull out over the coming days is likely to dominate trading activity today.