EUR/GBP at Lowest Since 2008 as BoE Announces Lending Program
The Great Britain pound jumped today as the Bank of England announced its new lending program that should encourage banks to lend. The currency reached the highest level since 2008 against the euro after Moody’s Investor Service downgraded Italy’s sovereign credit rating.
The BoE announced today:
The Bank of England and HM Treasury are today announcing the launch of the Funding for Lending Scheme (FLS). The FLS is designed to boost lending to the real economy. Banks and building societies that increase lending to UK households and businesses will be able to borrow more in the FLS, and do so at lower cost than those that scale back lending.
The announcement mentioned the negative developments in the European economy and, indeed, Moody’s downgrade of Italy was just another evidence of the deteriorating economic environment. The rating agency cut Italy’s government bond rating to Baa2 from A3. The reasons cited were the rising borrowing costs and the worsening near-term economic outlook. Yet Moody’s also mention strengths of Italy’s economy:
The sovereign’s current Baa2 rating is supported by significant credit strengths relative to other euro area peripheral economies, including (1) maintenance of a primary surplus, (2) large and diverse economy that can act as an important shock absorber in the current crisis, and (3) substantial progress on the structural reforms which, if sustained in the coming years, could improve the country’s competitiveness and growth potential over the medium-term.
GBP/USD climbed from 1.5430 to close at 1.5574 and GBP/JPY advanced from the opening of 122.33 to the closing price of 123.29. EUR/GBP dropped from 0.7904 to 0.7862, while its intraday low of 0.7855 was the lowest since November 3, 2008.
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Earlier News About the Great Britain Pound:
- Fears of Recession in UK Weaken Pound (2012-07-12)
- Pound Rises as Creation of European Stability Mechanism Delayed (2012-07-11)
- Pound Gains vs. Euro on Manufacturing Data, Falls vs. Dollar (2012-07-10)
- UK Pound Mixed as Forex Traders Look for Direction (2012-07-09)
- Bank of England Expands Asset Purchase Program (2012-07-05)