Daily Archives: September 20, 2011
Euro woes continue as Italy is downgraded, Greece still in the spotlight but the USD benefits from the flight to safety
Last night Greece said it held productive talks with the IMF and European authorities over whether they should receive more bailout funds. No information has been made public of the conversation but we believe that the talks will continue today.
Greece is due another instalment worth €8 billion of its rescue plan next month but the IMF feel that Greece is not doing enough to get its spending under control and may not warrant any further bailout. The IMF feel that Greece need deeper spending cuts to avert a default. The current rate of spending cuts have already caused mass demonstrations in Athens.
The EU & IMF have already thrown €110 billion at Greece and there is a further €109 billion provisionally agreed to be given to them in instalments should they meet their spending cut targets.
If Greece do not get further assistance then they will likely default on their debt and they will be bust. The fears of this sent global stock markets into freefall once again and the Euro weakened against all majors.
On the back of Greece last night S&P the credit rating agency cut Italy’s credit rating too. The main gainer from the debacle in the Euro zone is the USD as investors have been seeking refuge in the Dollar. This coupled with Obama’s speech yesterday to cut 3 trillion from the deficit over the next 10 years by taxing millionaires a minimum amount on their investments is the main contributing factor as to why the pound has lost so much ground recently against the USD. Now trading at around an 8 month low.
If issues are not sorted out very soon in the Euro then it would not surprise me to see the pound trading at levels below 1.50 against the USD by the end of this year. Against the Euro it is harder to predict as sterling should be trading in the late teens by now but every time Greece get a further bailout the Euro starts to strengthen again. I feel that Greece will get the €8 billion Euros they require next month and hence sterling will struggle to gain and could trade around the 1.11/12 level.
If you are concerned about sterling exchange rates and are looking to make a saving on your exchange over the high street bank then please feel free to contact me on 01494 787474. Just quote pound sterling forecast and ask for Ben for an exemplary service.