Welcome to our account of movements in the foreign exchange rate overnight.
Pound to euro
Question: When is a rescue fund not a rescue fund? Answer: In this case at least, when it can’t be used to rescue anyone, because a German constitutional court isn’t sure if it’s undemocratic. Not a riddle for the ages I admit, yet it accounts for why the pound has climbed half a cent against the euro overnight, and could be in line for further gains.
The Eurozone ESM rescue fund is intended as a collective pot which, theoretically at least, members in dire straits can dip into to keep themselves afloat. Yet Germany’s highest court (much like the Supreme Court in the US) is debating arguments at present that the rescue fund is undemocratic. It after all takes funds from the German taxpayer, and distributes them to governments elsewhere without legitimates checks and balances.
What happens next?
Is that undemocratic? Yes, but if you ask me, it’s the price Germany pays to be in a currency union, from which it has benefited immensely. Is this likely to see the euro slip in the coming days? Quite possibly, as the court has a mind to kick the issue into the long grass, which could cripple the Eurozone’s already lacking ability to fend off market attacks. That though could see a rising pound again.
Australian dollar to pound
Turning our attention south, it’s worth noting that the Australian dollar has seized half a cent from UK sterling overnight. This though isn’t because of any exceptional news from the Aussies. Instead, it’s because Australia’s biggest trade partner, China, got its export sector back on track last month, shipping out some $10 billion more goods than forecast.
That gives a boost to the AU dollar because, if China is selling more goods, that gives the Asian Tiger more cash to buy Australian minerals. That boosts Australia’s economy, which boosts the dollar in turn. Now, isn’t that just loverly?
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