In the previous European trading exchanges, the Euro lost versus the Great British pound as concerns over Greece and the US fiscal cliff weighed on risk sentiment, shoring up demand for safer assets and reducing that of riskier assets. Yesterday, the European Central Bank kept its Minimum Bid Rate unchanged at 0.75 percent, same as with the Bank of England that kept its Official Bank Rate at 0.50 percent and its Asset Purchase Facility program at 375 Billion Pounds. However, the single currency suffered the most because of uncertainties over the global economy. In today’s European exchanges, the same bearish scenario for the EUR/GBP pair is projected.
After holding interest rates, ECB President Mario Draghi said in a press conference that the central bank could not do anything more to help Greece with its financial difficulties. It likewise gave no assurance that its bond-buying program would help lower Spain’s rising borrowing costs, in contrast to market speculations. Draghi also highlighted weakness in the Euro Zone economy, which is likely to continue in the coming months, further hurting risk sentiment. In Greece, more uncertainties emerged as the European Union finance leaders decided to delay its decision of extending financial assistance to Greece for a week. Demand for the shared currency is also expected to wane as worries over spending cuts and tax increases next year are believed to push the US economy into deeper recession, boosting demand for the safety of the Greenback and the Yen and weakening prospects for the single currency.
Meanwhile, the holding off of the BOE of its asset buying and interest rate is expected to buoy the Sterling, as Britain’s economy emerged from double-dip recession and is expected to continue recovering in the future. Taking into account all the foregoing factors, a short position for the EUR/GBP pair is recommended in today’s European trades.
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