Euro focus- Spain’s borrowing costs spiral. What next for the single currency?
The bank bailout put in place of up to 100 billion Euros for the Spanish banking system looks to have well and truly back fired as fears that Spain will be slower to repay its debts sent the countries borrowing costs to unsustainable levels.
Spain’s 10 year government bonds shot up to 6.81% which are levels that have not been seen since before the single currency was formed. The higher these borrowing costs spiral the harder it will be for Spain & Italy to repay their debts. Analysts are stating that it is becoming more apparent that Spain will need a bailout and that if their borrowing costs spike at 7% this would be the same level where Greece, Portugal and Ireland all succumbed to pressure for a bailout.
The next key event which you should be looking out for is the Greek elections on Sunday. If the voters in Greece back the anti-
austerity left wing party it will push Greece closer to an exit from the Euro zone and cause even more upheaval. If you are concerned about events in Europe and have Euros to bring back to the UK or US please do contact me at bma@currencies.co.uk and I will explain all the options that are available to you.
The whole situation in the Euro zone is becoming more and more worrying. If Greece does leave the Euro and countries like Spain and Italy require massive bailouts the contagion will spread to other EU countries including the UK. It will be like a domino effect. With Britain such close trading partners with the EU you will find that sterling exchange rates could be hit in the long term against a host of major currencies.
Over the course of this month I still believe that the pound will struggle to push through the high of the year against the Euro. With all the uncertainty surrounding global financial markets, in the last week the pound dropped by two cents against the Euro before rebounding back to this two week high. Now may be a key time to look at securing your funds to take away the stress of exchange rate fluctuations through a forward contract.
After all is said and done, once the election in Greece passes no one really knows how things will pan out for Europe as we are in unprecedented
times. The one thing for sure is that we are witnessing history in the making.
If you have a requirement to buy or sell any major currency please feel free to contact me at bma@currencies.co.uk and I will explain all the options that are available to you to help you minimise your risk and maximise your exchange.
