Regular readers will be aware of the building pressure on Europe to resolve and create a long term relief package for Greece and Spain. Even though these packages have already been created both have yet to be confirmed. In Greece’s situation they are still struggling to abide by the financial program to manage their debt. They are expected to again ask for an extension to accept the changes. In Spain, even though the bond program has been signed off, Spain is yet to put their hand out and ask. It is for these two reasons why we have seen the euro weaken off slightly over the last 7 days.
Currently investors don’t know when, how much and if Spain will ask for assistance which is why they have taken money out of the risky currency.
So what does the future hold?
Well there are two key political events taking place today. These include a key meeting between Angela Merkel and Mario Draghi in Germany, and Paul Fisher, who is a Bank of England policymaker, that is speaking later this morning. Plus on top of that we have a bond auction for both Italy and Spain, (Spanish 10 year bonds are at 5.95% and Italian at 5.1%.)
I would not be surprised if in the next week Spanish bonds did creep over the 7% threshold that I think would be the catalyst for Spain to ask for a bailout, so as a result I can see GBPEUR rates staying steady at these levels or climbing slowly over the next 7 days. From next week onwards we enter a new month with new data that will once again push market prices, visit us on a regular basis to be keep up to date.
What would I do?
Well there is no Crystal Ball so I would suggest everyone who has a position or trade to complete come to their own conclusion. Plus I would also suggest limiting any exposure by utilising a STOP or LIMIT ORDER on larger transfers once I had calculated how much I was willing to risk.
However, simply put, if I was selling the Euro and needed to move within the next 14 days I would move sooner rather than later, if I was a buyer I would watch with much interest looking to ride the market up if my stress levels could stay at a comfortable level.
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