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Latest Pound to Euro Exchange Rate News
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Pound to Euro | Pound Euro Exchange Rate News and Insights
Pound euro exchange rate could become vulnerable to as markets begin to question the safe haven status of GBP
- Details
- Category: Pound to Euro
- Published on Friday, 27 July 2012 09:38
- Written by Sam Coventry
"The option market does seem to be suggesting that the potential downside in EUR-GBP may now be more limited" BofA Merrill Lynch Global Research.
This morning we see the pound to euro is making a strong comeback - the pairing is 0.2 pct higher on a day-by-day basis at 1.2791 at 10:18 AM in London.
UBS this morning advise that they remain bearish on the euro, concerning the EUR-GBP the bank says "Key resistance is at 0.7885, as long as this holds – look for a move to 0.7755 and then 0.7693. A break above 0.7885 would open 0.7925."
However, an analysis from Bank of America Merrill Lynch warns that the tail risk premium has declined in EUR-GBP, "suggesting that the market may be beginning to question the safe haven status of GBP. Hence the potential downside in EUR-GBP may be limited from current levels."
The basis of this view comes from an analysis of volumes in the options market.
BofA Merrill Lynch Global Research say:
"The tail risk premium for USD calls corrected higher this week, as the widening spreads for Spanish bonds weighed on the Euro.
"However, this increase in tail risk did not occur in EUR crosses. In particular, the premium for EUR-GBP puts relative to calls continued its recent decline.
"This may reflect positioning in the pair to some extent, but also may reflect a reduction in the perceived safe haven status of GBP.
"While we would not interpret this as an indication that EUR-GBP is likely to trade higher, the option market does seem to be suggesting that the potential downside in EUR-GBP may now be more limited."
