The Pound to Euro exchange rate dropped to a three week low this morning, continuing in the short term downward trend, the GBP/EUR exchange rate could weaken further as investors shun the Pound Sterling in anticipation of a gloomy mid-year fiscal statement from the government on Wednesday.
Technical forecasters have noted that a move below the 1.2256 GBP/EUR support region could spell further significant losses on the rate, the next level of support below there is the 1.1755 GBP/EUR which held last in February 2012.
German lawmakers have finally approved an aid deal for Greece. This news has caused a rise in risk appetite which has pushed the Pound to Dollar rate slightly higher in early morning trading; the exchange rate rise has slowed at $1.6050 with traders citing demand for the Pound to meet dividend payments. Offers to sell the pound were also cited above $1.6060 with traders awaiting the mid-year statement later this week for cues.
The UK’s finance Minister George Osborne's "autumn statement" to parliament will give an indication of the UK's fiscal position and likelihood of meeting debt targets.
During the weekend Osborne said Britain would take longer to deal with its debt pile and that a recovery will be sluggish.
The Swiss franc to Dollar exchange rate also reacted to risk appetite by hitting a six-week high in, the Swiss Franc has been tracking a firmer Euro after solid Chinese manufacturing data lifted risk appetite, buoying the single currency against the safe haven Dollar.
The Swiss Franc has been best currency to buy so far this year with the Franc has shadowing the Euro closely since the Swiss National Bank imposed a cap of 1.20 Francs to the Euro more than a year ago to ease deflationary pressures and ward off a recession.
Traders continue to keep a close watch on the American so-called "fiscal cliff", due to start at the beginning of 2013, which could potentially trigger $600 billion worth of tax hikes and spending cuts.