The Euro (EUR) exchange rate made strong gains against the Pound (GBP) but remained mired at a one-year low against the US Dollar (USD) on Tuesday.
Sterling experienced a sharp decline after the Pound’s volatility gauge surged by its biggest margin since 2008, as the markets grew concerned over the upcoming Scottish Independence vote due to take place later this month.
Fears that Scotland could leave the UK surged after a YouGov poll showed that the lead held by the No to independence campaign fell sharply over the past week as Scottish First Minister and leader of the Yes to independence campaign thrashed Alistair Darling in a television debate.
‘There is no doubt that the jitters ahead of the referendum are weighing on the Pound and the latest poll didn’t help. It creates uncertainty and people are increasing their use of options to protect themselves,’ said Jane Foley, senior currency strategist at Rabobank International.
Because of the concerns, the Pound slumped against the majority of its most traded peers on Tuesday. Even a report, which showed that UK construction sector activity expanded at its fastest pace in seven months last month, was unable to offer support to the currency.
‘UK construction firms saw one of the sharpest rises in output for seven years in August, with increasing workloads driven by an array of factors including surging homebuilding activity, greater infrastructure spending and renewed confidence within the commercial development sector,’ said Tim Moore, senior economist at Markit and author of the report.
Because of the Pound’s weakness, the Euro was able to take advantage and claw back lost ground.
The Euro meanwhile saw another bout of disappointing data releases on Tuesday as a report showed that unemployment in Spain increased unexpectedly last month. The number of people claiming unemployment benefits rose by 8,070 to bring the jobless total to 4.43 million. Economists had been forecasting for a fall of 25,000.
Against the US Dollar, the Euro was at its lowest level in a year on expectations that economic data out of the world’s largest economy will continue to support the view that the US economy is continuing to improve.
The single currency is under heavy selling pressure as speculation is continuing to mount that the European Central Bank will introduce new monetary easing measures at Thursday’s policy meeting. Some economists are speculating that a quantitative easing programme could be used. More weak data out of the region also lent support to the US Dollar.
Concerns over the crisis in Ukraine are also weighing heavily upon the single currency.
Euro Exchange Rate News:
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