09.27.11

Great Britain Pound grows on European Crisis

The European zone is confronted with more and more bad news each day. Some of the problems associated with the making progress of the sovereign debt crisis and the bailouts of countries such as Greece are related to Angela Merkel, the German Chancellor, who has seen divisions over the problem of the bailouts in the Eurozone in the coalition government. There are some German politicians who are disgusted at the thought of sustaining other European countries in their debt crisis. This comes as a consequence of the fact that Germany already provides huge quantities of money for the indebted nations and in order to sustain the Euro on the trading market. This is rather normal as the German economy is the most powerful and the most solvent one in the Eurozone. As a matter of fact, at the moment, Angela Merkel is faced with interior problems as there are parties which sustain the Euro and others which are against sustaining other countries in their debt crisis. The difficult situation which can be seen at this level is just the reaction of the European markets to the degradation of the economic background in the Eurozone as Greece is likely not to receive the second round of the bailout and as the Italian credit rating has been downgraded. Lots of European economies are faced with tensed situations and they all have a great impact on the trading market.

One of the most powerful reactions which can be seen on the market to this difficult situation in Europe is related to the trading sentiment which has turned against risk, generating an increasing demand for safe-havens. This is how the Great Britain Pound managed to gain some territory against its major counterparts today. The fall of the stock markets, of commodities and other higher-yielding assets has had an immediate effect upon the Great Britain Pound which has managed to reach the highest level against the Euro in two weeks. Also, the UK currency has posted gains against the US Dollar for the second day in a row. The currency also managed to recover from its losses against the Japanese Yen, but fell against the Norwegian Krone and the Swedish Krona.

The GBP is the currency which provides the highest interest rate among the safe-havens and can still boast a high level of liquidity, thing which the Scandinavian currencies cannot. On the other hand, the Great Britain Pound is also advantage by the fact that it is safely away from the problems in Greece and in Italy. The fact is that the high inflation in UK is a warrantee for the compatibility with the high yields on the government bonds. Moreover, the GBP is a very attractive currency for traders due to the fact that traders all over the world are now looking for an alternative to the Euro as an alternative to the US Dollar.

The GBP/USD pair increased from 1.5473 to 1.5534. The EUR/GBP pair decreased from 0.8725 to 0.8680. The GBP/JPY pair grew from 117.03 to 118.79.

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