Over the last 48 hours the Eurozone has taken a few steps back towards a solution to the crisis. The largest of which was the confirmation of another member state going with hand out to the European Central bank for a bailout, this was of cause Cyprus which was in the press yesterday. The rumors where in the market that this was a possibility as early as last Wednesday however the volume they expect to need far surpassed what was expected. Current rumors are that they will need upwards of €10 billion or the equitant of €10,000 per Cypriot. So how did this change the market? The main reaction was a run on the Eurozone as people flocked out even though some of this was pricing in the expectation that the crises meeting later this week with resolve nothing, again. The meeting, which will be the 20th since 2010, is expected to be concluded with another flat statement about promises that it will be resolved but with little detail or change actually confirmed.
Overall the Cyprus bailout is nothing in the whole schemes of things for Europe but now means that 25% of member states need a bailout, and raises alarms of the risk of contagion across the rest of Europe that everyone should be aware of. The UK is not in the Euro and we are not going to join. But when 40% of our trade is with the Eurozone, its future affects our future. It’s in our national interest for the Eurozone to resolve its difficulties. Currently the little support it has been getting is from Germany, the strongest state, however the figures show there may not be much left for them to give. The Single state has €17 trillion of deposits and a total asset base of €34 trillion, which hugely dwarfs the €1.2 trillion German tax base that they are growing reliably dependent on.
Food for thought perhaps for us all and everyone with a currency need, how are they going to fundamentally get out of this mess and how much worse could it get?
For a more up to date forecast on the euro situation or any currency feel free to contact us today. We are well placed to help clients time transfers at peaks rather than lows which could happily save thousands. Over the last two trading sessions the difference on GBPEUR has been over 1.5 cents!!
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