The Pound has risen close to a three-week high against the Euro after the single currency came under broad pressure as investors worried over Italian Prime Minister Mario Monti’s decision to resign.
As soon as he announced his decision took the currency took a nose dive as political uncertainty rose in the heavily indebted country. The Euro dropped by 0.2% against the British currency falling to 80.37 pence this afternoon. Signs of further weakness could see that amount drop further to below the psychologically important 0.80 mark.
“The resignation offer of PM Monti in Italy is likely to weigh upon the Euro going forward both against the Pound and against the Dollar,” said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.”The risk of Euro/Sterling breaking below 80 pence has increased following the announcement; it could lead to a pick-up in safe-haven flows into the UK as we move into next year.”
Against the Dollar the Euro halted its declines but the pair remains highly volatile. Some economists are predicting that if the Euro can hold its ground it may strengthen to a seven-month high. The 17-nation currency is poised to halt recent declines as long as it remains higher than its average, currently at $1.2918, according to Roelof-Jan van den Akker, a technical analyst at ING in Amsterdam. Should it hold above those levels the Euro will strengthen toward $1.3172, the high of September the 17th, he said.
“The market needs to find a bottom, and support comes in between these two lines,” van den Akker said today in an interview with Bloomberg. “I’m looking for a reversal around that area, from where the next rally should start.”
The Pound in contrast only made a slight gain thanks to demand from investors. If the Eurozone suffers surprising negative news like it has done in regards to the Monti affair then the currency will weaken allowing the Pound to benefit from investors seeking a safe-haven.
The Pound to Euro exchange rate is currently trading at 1.2428
The Pound to US Dollar exchange rate is currently trading at 1.6068
The Pound to Australian Dollar exchange rate is currently trading at 1.5311
The Euro to US Dollar exchange rate is currently trading at 1.2927
The Euro to Pound exchange rate is currently trading at 0.8046
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