British Pound Sterling: Currency continues advance against EUR, safe haven status amongst Eurozone fears remains intact

Last Updated on Monday, 06 February 2012 14:31 Written by Sam Coventry Monday, 06 February 2012 14:29

The Pound continued its advance against the Euro this morning, but the UK currency declined for a second day versus the U.S Dollar, as market speculation escalates over the prospect of further quantitative easing from the Bank of England this week.

British Pound Sterling (GBP) in Euro (EUR): GBP/EUR is 0.6% higher at 1.2085. The British Pound Sterling (GBP) in US Dollar (USD): GBP/USD is 0.2% lower at 15782, the British Pound Sterling (GBP) in Canadian Dollar (CAD): GBP/CAD is 0.26% higher at 1.5752.

"The UK currency continues to benefit from its position outside the Euro-zone and has been seen as somewhat of a haven from the debt crisis. However, the preliminary fourth quarter growth figures showed the UK economy contracted in the final three months of the year, raising the prospect of additional quantitative easing from the BoE," says Adam Solomon at TorFx.

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It is not a foregone conclusion though and recent data over the past week showed surprisingly strong growth in manufacturing and services sectors, which may convince the majority of the MPC to adopt a wait and see approach before committing to more bond purchases.

The Euro also declined heavily against the U.S Dollar, amid concern that Greece’s political leaders will fail to reach an agreement on a debt restructuring deal, which would allow them to receive a second bailout and stave off the threat of a hard default. The Euro declined against 13 out of the 16 most actively traded currencies and further losses may be likely until a resolution is found.

Elsewhere, the Australian Dollar slumped from a six month high against the U.S Dollar and the strongest level since 1985 versus the Pound, after a government report showed that retail spending unexpectedly declined in January, raising the chances of an RBA cut on Tuesday. The Aussie Dollar has been largely resilient to speculation of a rate cut and this would be the third in as many months.