Why are Euro and British Pound Tanking?

The Euro and British pound are selling off aggressively today on the heels of comments from government officials and market players.

The EUR/USD broke the 1.30 level after legendary investor George Soros said that the currency may not survive the crisis without a global plan. He is pushing for the European Union to come up with a way to deal with all of the toxic debt sitting on the balance sheets of European banks. To ask for each country to come up with its own solution is not the right solution, a regional response is needed. Earlier this morning, ECB President Trichet also said that he is not excluding cutting rates below 2 percent.

As for the British pound or GBP/USD, it has come under selling pressure on comments from UK Chancellor Darling, Bank of England Governor King and BoE member Blanchflower. This morning, in an exchange of letters Darling and King announced that the central bank is authorized to purchase up to GBP 50 billion in investment grade assets ranging from corporate bonds, commercial paper and syndicated loans. Details will be released next week. The Chancellor also talked about Quantitative Easing and how the BoE needs his written approval to use the money for Quantitative Easing which entails purchasing UK gilts. Although more stimulus should be ultimately good for the country, many investors fear that the UK could become the next Iceland.

About Kathy Lien 236 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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