Sterling and Euro to Open 2012 Under Pressure

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Updated: Jan 1, 2011, 00:00 UTC

Traders monitoring the value of the euro following the turmoil in Europe may have noticed a drop in the currency on the markets this week Compared to the

Sterling and Euro to Open 2012 Under Pressure

Traders monitoring the value of the euro following the turmoil in Europe may have noticed a drop in the currency on the markets this week

Compared to the yen and the dollar, the euro fell to a ten-year low, causing investors to be nervous after the long term Italian bond sale, Reuter’s reports.

The euro was down 0.1 per cent at $1.2922 in Asian trade, its lowest level since January 10th, when the euro hit a low of $1.2860 for the year.

Some encouragement was found at auctions of Italian debt, but today’s stocks are set to be a harsher test.

A report published by Standard & Poor’s recently suggested that the eurozone could plummet into a second recession in the coming year.

The sterling fell against the dollar in forex trading as the year closed dropping to a two-and-a-half month low versus the greenback.

According to Reuters, the pound slipped 0.3 per cent on the day to $1.5397 – its lowest level since early October – as model-related funds and real money investors sold the British currency.

Signs of slowing economic activity and flat growth forecasts have had a negative impact on the currency, sparking speculation that the Bank of England will extend its quantitative easing (QE) program.

The Financial Times reported “odds-on” that the central bank will implement more QE in early 2012 in a bid to help the economy. The UK can expect a further £50 billion in February, taking the total to £375 billion and it is highly possible the bank could ultimately take the stock of QE even higher.

The euro is set to remain under pressure due to the European debt crisis after ending the year on a bleak note, it has been revealed.

Forex markets showed that the euro marked a downfall to 0.3 per cent at $1.2916 at the close of stocks suggesting that the instability is to remain into 2012. The single currency recouped some losses from earlier this week when it sank to a 15-month low of $1.2858 following an Italian bond auction.

FX trader said that the euro’s drop in value was made even more significant by illiquidity and the effects of the debt crisis currently concentrated in Italy, which is the eurozone’s third largest economy. Italy currently needs to raise €452 billion in debt markets in 2012 to clear itself of financial negativity.

Yesterday, the euro fell to a ten-year low compared to the yen and the dollar. Both the euro and the sterling will remain under pressure in early 2012.