Euro Bailout package lends support to Euro exchange rates

Yesterday the pound weakened against the Euro in the morning’s session hovering at a years low against the Euro due to a major Euro-zone bailout deal, which should ensure the EU is capable of bailing out any other member states beyond Greece and Ireland that require assistance.

This trend has continued this morning with the pound trading at 1.1540.

EU leaders agreed to increase the lending capacity of the European Financial Stability Facility to the full 440 billion Euros from around 250 billion, and enable the fund to buy the government debt of distressed member states.

This current bailout package will increase investor confidence that the EU can sort out any financial crisis that may occur in the future. If you couple this with the expectation that the ECB may raise interest rates next month then we could see GBP/EUR rates hovering around 1.12 or 0.89p in the coming weeks.