Daily Archives: June 11, 2012
Will the Spanish bailout package lead to the Euro strengthening?
Over the weekend Euro zone finance ministers rushed Spain into an EU-funded rescue for its debt-stricken banks to pre-empt the threat of a bank run if Greece’s debt crisis flares again, this coming after Prime Minister Mariano Rajoy insisted that Spain needed no. The 17-nation currency area agreed to lend Madrid up to €100 billion for its bank rescue fund, more than an initial audit suggests it is likely to need, in an attempt to reassure investors and the global economy.
Initial re-actions showed support for the Euro pushing levels below 1.23 overnight on Sunday, however as the market digested the bailout the general consensus, as with many recent moves from Europe, was that the bailout will only create a short term fix for what is a very deep and underlying problem.
I too agree with this and feel that until the Greece elections have passed on the 17th June, the Euro is likely to find little support and I could see a move back towards 1.25.
For the best exchange rates on your transfer and to discuss the various contracts we can offer in an attempt to maximise your currency exchange then please email Mike at mgv@currencies.co.uk
Greece – Political Uncertainty could hinder Euro further.
Greece is set to go to the polls again on the 17th June, a date that should be firmly lodged in the mind of any client with an interest in the Euro.
Polls suggest the leftist Syriza bloc, which came second in the 6th May vote and rejects all further cutbacks, could become the largest party after a new election. Syriza wants to renegotiate the bailout package but also wants to keep Greece in the euro. However European leaders say they will cut funding for Greece if it rejects the bailout agreed in March.
This would effectively mean bankruptcy for Greece and German Finance Minister Wolfgang Schaueble has ruled out amending the agreement.
Should the Syriza Party take control, this could have major implications for Europe and I feel this will continue to heap pressure on the Euro and any Euro sellers, certainly if funds are not liquid, may wish to consider a forward contract to guarantee their rate in advance.
What now for the Aussie, Kiwi and Rand?
With the recent bailout agreement for Spain I feel the major benefactor could be the so called ‘riskier’ currencies, these being the AUD, NZD and ZAR. The fact the EU have made these funds available to Spain is likely to lead to an initial increase in market confidence and therefore a move away from the ‘safe haven’ currencies such as the US dollar (I would expect the GBP/USD to head back towards 1.56/57 as a result) and an increase in demand for currencies such as the Aussie, Kiwi and Rand (those offering a higher yield). This could be a short term trend however and I would certainly expect to see some big moves for these currencies in the coming weeks.
Important Data for the Rest of the week
09:30 UK – Industrial and manufacturing data, expected to show a small increase month on month and may lend to Sterling strength in the morning session.
15:00 UK – NIESR GDP estimate – with the economy in recession, this data will be keenly viewed to see if the UK is any closer to showing positive growth and is a precursor for the second revised figures later this month.
13/6/12 13:30 US – Retail Sales figures, expected to show a fall month on month from 0.1% to – 0.1% – could cause dollar weakness.
13/6/12 22:00 NZ – RBNZ Interest rate decision, expected to stay at 2.5%
14/6/12 08:30 – Swiss National Bank interest rate decision
14/6/12 09:00 – European Central Bank Monthly report
To discuss my views or your transfer in more detail then please email Mike at mgv@currencies.co.uk
