Forexpros – The euro fell to a fresh 22-month low against the broadly stronger pound on Monday, amid fresh concerns over the economic and financial outlook for Spain, while the view that the pound is a safe alternative to the euro and the U.S. dollar buoyed sterling.
EUR/GBP hit 0.8125 during European morning trade, the pair’s lowest since June 30, 2010; the pair subsequently consolidated at 0.8130, shedding 0.23%.
The pair is likely to find support at 0.8067, the low of June 29, 2010 and short-term resistance at 0.8144, the session high.
Concerns over the economic outlook for Spain re-remerged after official data confirmed that the country’s economy entered a recession in the first quarter, with gross domestic product contracting by 0.3% in the three months to March and 0.4% year-on-year.
Market reaction remained muted as the figures were slightly better than estimates released by the Bank of Spain last week for a 0.4% contraction in the first quarter and a 0.5% contraction on the year.
The data came after a government report on Friday showed that the country’s unemployment rate climbed to a record 24.4% in the first quarter.
Also Monday, ratings agency Standard & Poor’s announced widespread credit ratings downgrades on Spain’s troubled banking sector, following a two notch downgrade of the country’s sovereign credit rating last week.
Meanwhile, the greenback remained under pressure after Friday’s weaker-than-forecast first quarter growth data added to speculation that the Federal Reserve may implement a third round of easing measures.
But the pound remained vulnerable amid concerns over the economic outlook after data last week showed that the U.K. economy entered a recession in the first quarter.
Sterling was hovering close to an eight-month high against the U.S. dollar, with GBP/USD inching up 0.08% to hit 1.6275.
Later in the day, the U.S. was to publish official data on core personal consumption expenditures price inflation and personal spending, as well as a report on business activity in Chicago.
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