The Slide of the Single Currency

GBP EUR Slumps with Lower GDP Print

As the week draws to a close the markets are left to reflect
on what has been described by many as the beginning of the end for the Eurozone
and its single currency. As financial Armageddon bears down on the Spanish
economy and investors run for cover, I have to ask myself which twist this
Greek tragedy will take next. In fact, it is now probably better described as
the sinking of the Spanish armada and any default by Spain would not only cripple
the country’s economy but ensure contagion spread through the whole EU region.

One by one country’s economy’s would contract and they would
no longer be able to help bail out their counterparts, or worse, decide that
any default of their own was better than paying years of high interest debt.
For this reason I believe that the key European leaders will continue to make
the ‘right’ noises about the necessary austerity measures and bailout funds
that will help stop the markets going into complete panic.

Personally I feel that whilst Europe is suffering, the UK is
not far behind. Yes our economic data is improving but we are so interlinked
with Europe (they are our largest trading partners by some distance) that any
long-term recession there would hinder our ability for economic growth.

I now feel any move back down below 1.20 is highly unlikely
in the short-term, although those waiting for 1.25 should heed my warning
above, as the UK will ultimately be affected by any long-term economic
contraction in Europe.

If you have an upcoming currency transfer, or
would like an up to date analysis of current market trends, then please feel
free to contact me directly at [email protected]
or on 01494 787 478