Pound falls versus euro as bailout talks start
Published 18/11/2010 | 11:27
The pound weakened against the euro for a third day as the Government started talks about a potential bailout from the European Union and International Monetary Fund, decreasing demand for the British currency as a haven.
Sterling was little changed versus the dollar. Central Bank Governor Patrick Honohan today said he expects the country to tap a loan from the EU and IMF worth “tens of billions.” The pound had risen 4.7pc versus the euro from October 25 to November 15.
“It’s the euro story,” said Elizabeth Gregory, a market strategist at ACM Advanced Currency Markets in Geneva.
“The euro has gone through a disproportionately large selloff against the pound. Perhaps all the fear and worry about an Irish bailout was already priced in.”
The pound slid 0.5pc to 85.47 pence per euro at 8:37am, after falling to 85.05 yesterday. It traded at $1.5930 against the dollar, after tumbling as much as 1.3pc on November 16 to the weakest in nearly three weeks.
UK government bonds fell, pushing the 10-year yield up four basis points to 3.31pc, the highest since August 2, according to Bloomberg generic data. The two-year note yield rose three basis points to 1.08pc.
The Government will hold talks with EU, IMF and European Central Bank Officials in Dublin today about a possible rescue package for its national finances and banking system.
Honohan, speaking on RTE, said he expects that “a loan will be made available and drawn down as necessary.”