GBP/USD rates climb on the back of Spanish bailout

Sterling continued to move further away from its recent lows against the dollar as a bailout for the Spanish banks increased appetite for riskier currencies. Pound/dollar rates hit a high of $1.5579 on Monday climbing up from the $1.52 we saw a couple of weeks ago. 

With Spain having their credit rating cut last week and the growing concerns over the banking sector there was added speculation that a bailout could be on the cards. On Saturday euro-zone chiefs agreed a €100 billion rescue package for the troubled banks, this caused a flight from safety as investors left the safe haven U.S dollar and headed back to the single currency, weakening the greenback and driving the GBP/USD cross back towards $1.56.

However, many see the latest bailout as a short term solution for the troubled Euro, it is still unclear what the terms for the bailout will be and with the Greek elections approaching this weekend many investors will still be concerned about the long term future of the euro-zone. Saturday’s votes could push rates either way and no one is sure which way the markets will move.

Sterlings gains against the dollar could be short lived if the anti-bailout party are victorious at the weekend. A victory could see Greece leave the Euro and with the UK’s exposure it could force the Bank of England to consider another round of quantitative easing.

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