Pound Drops On Risk Aversion

The pound slipped against the other major currencies in European deals on Monday, as European stocks fell on worries over Greece’s future in the euro area.

After Greek Prime Minister Alexis Tsipras took to parliament on Friday to lambast its creditors approach to the negotiations, European Commission President Jean-Claude Juncker accused Tsipras of distorting proposals by international creditors for a cash-for-reform deal.

Greece postponed EUR 300 million debt payment due to the International Monetary Fund on Friday, as the nation and its creditors were deadlocked in talks on releasing bailout amount.

Tsipras plans to meet German Chancellor Angela Merkel and French President Francois Hollande on the sidelines of a summit in Brussels on June 10, the Bloomberg reported, citing a Greek official.

Further weighing on the pound was the downgrade of U.K. gross domestic product growth by the Confederation of British Industry.

CBI lowered the growth outlook for this year to 2.4 percent from 2.7 percent predicted in February. For 2016, the growth forecast was lowered to 2.5 percent from the previous estimate of 2.6 percent. Growth in 2014 was 2.8 percent.

The pound performed in a mixed manner in the Asian session. While the pound rose against the euro, it was steady against the greenback and the franc. Against the yen, the pound declined.

In European deals, the pound dropped to 1.5220 against the dollar, from its early high of 1.5304. If the pound continues its decline, 1.50 is seen its next support level. The pair was valued at 1.5261 at Friday’s close.

The pound pared gains to 1.4305 against the franc and 0.7316 against the euro, off its previous high of 1.4388 and a 5-day high of 0.7265, respectively. Thereafter, these pairs held steady. At Friday’s close, the pound was valued at 1.4339 against the franc and 0.7271 against the euro. Next key support levels for the pound are seen around 0.75 against the euro and 1.40 against the franc.

The British currency weakened to a 4-day low of 190.67 against the Japanese yen, after rising to 191.85 at 7:15 pm ET. The pound-yen pair ended Friday’s trading at 191.74. Continuation of the pound’s downtrend may take to a support around the 181.6 mark.

Revised data by the Cabinet Office showed that Japan’s gross domestic product expanded 3.9 percent on year in the first quarter of 2015.

This was well above of forecasts for 2.8 percent growth and up from the February 15 preliminary reading of a 2.4 percent rise.

Looking ahead, U.S. labor market conditions index for May is set for release in the New York session.

The material has been provided by InstaForex Company – www.instaforex.com

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