Amidst the uncertainties surrounding the Euro area, the single currency won over the British pound in yesterday’s European trades as British home prices declined for a second straight year, on weak prospects for the UK economy and waning consumer confidence that weighed on demand for homes, and caused banks to become reluctant to issue home loans. In today’s European trading session, the Sterling is expected to turn losses into gains as markets are bracing for the austerity vote of the Greek parliament.
The future of Greece is once again placed in peril as Greek lawmakers are set to vote on fresh austerity measures needed for the indebted country to receive the next round of bailout funds, otherwise it would run out of money on November 15 when a debt repayment falls due. Against a backdrop of protests from angry Greeks who suffered enough because of tax hikes and pension cuts implemented by the government, Prime Minister Antonis Samaras urged the Greek parliament to favor the austerity measures to save the country from a catastrophe. The implementation of the austerity measures is need for Greece to receive the next round of bailout funds worth 31.5 Billion Euros from the troika of lenders. With investors seeking refuge from safer assets, demand for the Euro is seen to wane.
Meanwhile, the Pound is projected to rise on speculations that the Bank of England would keep the Official Bank Rate and Asset Purchase Facility program. The central bank is expected to maintain a wait-and-see approach as the UK economy emerges from double-dip recession. Given these factors, a short position for the EUR/GBP pair is recommended in today’s European trades.
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