Pound Increases against Euro after Greece Debt Aid Agreement

The Pound saw its first surge in the last 4 days against Euro amid the preliminary decision of an agreement among the Finance ministers of the Euro zone countries on Greece debt. This agreement has eased the terms of emergency aid for Greece. It also involves cutting rates on the bailout loans, suspending interest payments for 10 more years and giving Greece more time to repay the debt. However, how the bond purchases will be done is still something that is to be worked on.

According to analysts, the Euro zone crisis is far from over and it will not go away smoothly. The investors are currently considering UK Pound to be a safe haven as they want to diversify away from Euro. They are also questioning the decision of bond buyback policy as most of them don’t think that it will generate enough savings for Greece. 

Pound, also known as Sterling has strengthened against not only Euro, but 16 other major counterparts as well. A recent report confirmed that the United Kingdom economy has got over the double-dip recession in the 3rd quarter of 2012 and this news helped Pound to boost further. It has risen by 0.2% against Euro and is currently priced at 80.75 pence per Euro.

As far as the latest report from the Office for National Statistics is concerned, the gross domestic product price of UK has surged by 1%. Mervyn King, the current Governor of Bank England stated that the inflation in United Kingdom is slightly above target and though the economy is recovering slowly, a rapid speed cannot be expected.

The United Kingdom yield on 10-year gilt has climbed up by 2 basis points and is at 1.85% currently. This brings the highest value for the Yield since 2nd November. The 1.75% bond scheduled to mature in September, 2022 however has plummeted by 0.13%.

According to the analyst of Investec Bank Plc., Brian Barry, the market still is pretty dependent on any news that’s related to Greece and Pound is basically being boosted as investors are looking for suitable alternatives. He also added that Sterling is expected to grow further over the next few days and if more positive news starts coming in, the surge may continue till the end of this year.