Good morning and welcome to today’s foreign exchange market commentary on Wednesday, the 30th of May.
The International Monetary Fund managing director offered some suggestions to the people of Greece in an interview to The Guardian, which sums to up two words: stop complaining. While saying she has sympathy to the sufferings of Athens, she added that she also thinks about those who try to evade tax all the time. And then she empathized with the less privileged. “I think more of the little kids from Niger who gets two hours of education … I have them in my mind all the time.”
Put simply, the Europe has become too soft a continent. It’s time to take a real hard look. When the boom came, all boats rose with the yachts rising faster than smaller crafts. However, as the tides ebbed, all boats hit aground though there are exceptions. Bigger countries like Germany and smaller ones like Finland have one thing in common; they focus on self-improvement and hard work, which is sorely missing elsewhere in Europe.
Britain stacked up huge external debt of $10 trillion (private and public combined), next only to the US, Italy’s Silvio Berlusconi took advantage of a self-serving and divided opposition that failed to offer an alternative, Spain and Ireland allowed property bubbles to build up while unwilling and corrupt governments failed to do its basic duties, including paying taxes.
Following the 1992 Maastricht Treaty, weaker economies hid there structural inefficiencies as the euro was launched in 2002. Cheap credit that flowed following the union compounded the matter further.
The strictures prescribed by Lagarde seem like a bitter pill to swallow. But then there are not too many alternatives.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.2507
GBP/US$ – 1.5610
GBP/CHF – 1.5029
GBP/CAN$ – 1.5998
GBP/AUS$ – 1.5931
GBP/ZAR – 13.0144
GBP/JPY – 123.98
GBP/HKD – 12.1168
GBP/NZD – 2.0514
GBP/SEK – 11.2621
EUR: Spain got jolt yesterday after the European Central Bank rejected the Spanish government’s plan to infuse €19 billion in the recently nationalized Bankia group. The news pushed the EUR/USD lower to 1.2460, the least since July 2010 as markets reacted to an already elevated risk aversion sentiment. Sterling continued to benefit yesterday as markets cut down on risky assets following the well publicized EU developments with the GBP/EUR touching a high of 1.2527 in late afternoon trade. Spanish 10-year bond yields traded higher as investors remain worried that Europe’s fourth largest economy would soon forced to seek external assistance to stay afloat. There’s no economic news due from the EU region today and the euro may witness choppy trading as markets remain volatile. GBP/EUR opens at 1.2505 this morning.
USD: The US dollar index, a measure of the greenbacks strength against a basket of six major currencies, touched new highs yesterday as news of the ECB rejecting Bankia’s bailout demand hit the market. Investors continued to seek refuge in safe haven assets despite the UK CBI Distributive Trade survey reading coming at +21 versus last month’s -6. The cable continued to struggle against the greenback with the GBP/USD falling to 1.5608 in late afternoon trading, sterling’s lowest level since March 12. The economic data calendar is light today with the pending homes sales in the US and money supply data from the UK on the docket. GBP/USD opens at 1.5568 this morning.
Going on holiday? Why not compare travel money options through our sister site MyTravelMoney.co.uk and start saving!
Have a great day!
