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Sterling Gains against Euro

Sterling Gains against the Euro

On Friday, sterling rose against the euro after EU leaders made an uncertain response to their support of Greece.

Having taken part in a summit in Brussels, leaders from eurozone economies agreed that Greece would receive their aid – but exactly how much and what they would do remained unclear.  This caused the pound to gain broadly, with the euro down to 86.70 by just after 09:00AM GMT.

Earlier in the week, the pound had weakened somewhat with the euro reaching three-week highs against it after the Bank of England provided a dovish view of the UK economic recovery.

Mervyn King, the Governor of the Bank of England, had said that while the current QE programme was halted, it was too early to say whether it might need to be reintroduced.

His comment that the British economy continues to “bump along the bottom” certainly gave investors a lack of confidence.

Now with EU leaders agreeing to help Greece heave itself out of its massive deficit (currently it sits at 12.7 per cent), eurozone stability could be restored by a degree – yet some politicians seem hesitant.

Angela Merkel, the German Chancellor had commented on Thursday that there were rules to abide by with regards to Greece’s boost -  and today it was announced that Germany’s economic growth unexpectedly came to a halt in the fourth quarter of 2009.

For the whole eurozone, GDP fell by 4 per cent in 2009 and while analysts do not expect it to fall back into recession, there is nevertheless evidence that there is a significant challenge ahead.