Daily Forex Round-Up: Euro (EUR) Gives Up Greek Deal Gains
Although the euro got off to the prospect of a seemingly strong day on November 27 following the agreement on Greece’s bailout, the single currency failed to hold on to the Greek deal gains, with analysts already doubting the debt-ridden country’s ability to achieve its growth targets. The renewed Greek woes however benefitted the pound, which received an additional boost by a GDP report indicating that the UK exited a double-dip recession in the third quarter of 2012.
**The Single Currency Loses Greek Deal Momentum**
On November 27, Bloomberg reported that the single currency lost 0.1 percent to $1.2963 at 8:17 a.m. EST, after advancing to $1.3009, the strongest since October 31 and posting gains against the majority of its 16 major peers. Although the Eurozone ministers finally reached an agreement on reducing Greece’s debt, the deal’s impact on the euro quickly wore off. “The Greek deal was pretty much as the market expected,” notes Raghav Subbarao, a currency strategist at Barclays Plc (LON:BARC), as quoted by Bloomberg. “The likelihood of a Greek default in the near term was priced to be very low and will pretty much go to zero once Greece has the cash in hand.”
Although the additional funding for Greece has been secured, Reuters reports that few analysts expect the agreement to be the final chapter in the Eurozone debt crisis saga. Michael Hintze, founder and CEO of hedge fund CQS, told Reuters that while he expected the Eurozone to continue muddling through its troubles “the chances of misstepping on the way through are pretty high.”
Bloomberg reports that the euro was little changed against the yen at ¥106.47, after gaining 0.5 percent. The yen fell 0.1 percent against the greenback as well, dragged down by the latest remarks from the leader of the Liberal Democratic Party Shinzo Abe, who noted that the government and the Bank of Japan should discuss an inflation target to pursue bold monetary easing.
**Pound Supported by Greece Concerns, GDP Data**
!m[Pound (GBP) Advances Against The Single Currency](/uploads/story/912/thumbs/pic1_inline.png)The renewed Eurozone concerns were beneficial to the pound, which rose for the first time in four days against the euro, as reported by Bloomberg. “The Eurozone crisis is not going to go away smoothly, it’s just one fraught step after another,” noted Simon Derrick, chief currency strategist at Bank of New York Mellon Corp (NYSE:BK), as quoted by Bloomberg. “The UK currency represents a credible safe haven for people looking to diversify away.”
The pound was also supported by a report released by the Office for National Statistics showing that UK GDP rose one percent from the second quarter signalling an end to Britain’s double-dip recession.
**Sweden’s Krona Declines**
The Swedish krona lost 0.9 percent against the euro, which rose to 8.6509 kronor, the Financial Times reported on November 27. In addition, Sweden’s currency slid one percent versus the greenback, with the dollar rising to 6.6727 kronor. The krona plunged against the euro and the dollar after an index showed a surprisingly large dip in consumer confidence in November. Bloomberg reports that Sveriges Riksbank has signalled that it may cut interest rates at its next policy meeting in December as it predicts that Sweden will suffer from falling demand from Europe.
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