Risk appetite has returned to the markets in full force today, and the UK pound is feeling the effects. Cable is moving higher today, supported by rallying equities and stability in the eurozone.
With the situation looking hopeful in the eurozone, it is little surprise that the pound is gaining. Concerns about the collapse of the eurozone are receding, and Forex traders are breathing a sigh of relief to know that British banks, which are heavily exposed to sovereign debt in Europe, are likely to be safe for now.
Sterling is deriving support as well from rallying stock markets. European stocks, including those in Britain, rallied today, and most of the Asian stock indexes ended higher as well. The US stock market is in the process of rallying, with the Dow up almost 300 points. Risk appetite truly has returned in earnest.
Interestingly, even with the recent troubles in the eurozone, Lord Michael Heseltine, the former Defense Secretary in Britain, continues to insist that Britain should abandon the pound and join the eurozone. If the euro does manage to pull out of this trouble, and if the pound continues to lose strength the euro, he might be proved right.
At 16:11 GMT, GBP/USD is higher at 1.6067, up from 1.5935. EUR/GBP is slightly higher at 0.8549, up from 0.8539. GBP/JPY is higher at 123.9460, up from the open at 123.7450.
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