Investors initially sold the Euro after the European finance ministers failed to reach an agreement over a Greek program to trim down Greece’s debt. However, trades were reversed after German Chancellor Angela Merkel expressed optimism that a Greek decision would be reached on Monday when the leaders resume discussions. The Pound meanwhile, was hurt as Public Sector Net Borrowing jumped in October, giving rise to concerns that Britain would not be able to meet its deficit targets in 2012-2013. In today’s European exchanges, the single currency is expected to draw support from Merkel’s statements. However, the Bank of England MPC Meeting Minutes is seen to reduce the Sterling’s losses versus the Euro.
At the end of the Eurogroup’s meeting yesterday, the European leaders failed to clinch an agreement to reduce Greece’s debt. However, Merkel saved the Euro from a sell-off after she spoke ahead of the EU Summit that there are possibilities that Greek solutions would be reached on Monday. As the European leaders make pledges to avoid Greece’s default, speculations that funds would continue to flow into the country over the next days, are likely to extend support to the shared currency. Given markets’ renewed optimism, the Euro is seen to rise versus the Sterling in today’s exchanges.
But the Pound is likely to pare losses as the BOE minutes showed that majority of the policymakers did not favor another QE this month. Although there is still scope for the central bank to further expand monetary stimulus, the BOE suggested that interest rates would not be lowered anytime soon. With all these factors, a long position is recommended for the Euro-Pound pair in today’s exchanges.
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