Comments from European Central Bank President Mario Draghi that the central bank’s bond-buying program is ready to be activated supported the Euro versus the British pound in the previous European trading exchanges. As the Eurogroup officials are set to meet today in Luxembourg for the formal launch of the Euro Zone’s permanent bailout fund, the EUR/GBP is expected to rise in today’s European exchanges.
Last week, the ECB kept interest rates unchanged at 0.75 percent, without disclosing any new measures to combat the debt crisis. Instead, its passed the ball to Spain and other troubled countries to first seek for financial assistance before the ECB could proceed with its new program. Spain is already forced to request for a bailout, but a recession and rising borrowing costs, the debt-stricken country is expected to not ask for a bailout from the European Stability Mechanism. The reasons could be the recent drop in bond yields after the ECB said that it would do whatever it takes to protect the Euro, and protests against the austerity measures back in Spain. But borrowing costs are seen to come under pressure as investors are already losing their patience with the country’s delay over a request for financial assistance. In Greece, an agreement as to the austerity measures required by the troika has not been reached yet, due to conflicts between the Greek government and the country’s international lenders.
Meanwhile, the International Monetary Fund is said to cut the UK’s growth forecast, when it lowers the outlook for the global economy. Estimates of the IMF’s outlook for UK growth came as a German newspaper claimed to have seen a copy of the fund’s new forecasts, according to a Telegraph article. With these factors, a long position for the EUR/GBP is suggested in today’s European trades.
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