Good morning. The epic Greek rescue saga ran into trouble after relatively poor EU member Slovakia stalled further strengthening of the eurozone’s emergency bailout fund (EFSF), putting a question mark over “richer” Athens’ unlimited access to free lunches. Nothing wrong for a small nation of 5.5 million, who would be burdened by £6 billion of additional contribution commitment, since Greece has been living on borrowed money and time for far too long.
British Prime Minister David Cameron urged EU leaders to adopt a “big bazooka” approach to arrest a contagion effect. He said France and Germany should set aside their differevces about recapitalizing the region’s banks. Germany wants individual member countries to prop up their banks, while France wants to tap the €440 billion EFSF for the same. One possible reason might be more French banks are in dire situations than Germany. Only time will tell.
“The eurozone is probably contributing more to that uncertainty and lack of confidence than anything else. You either make the eurozone work properly or you confront its potential failure,” said Mr. Cameron urging France to accept more credible bank stress tests in future. Well stress test and higher tier 1&2 capital for banks are all very good, but more important is stronger ring-fencing norms and strict oversight regime, a line advocated by business secretary Vince Cable.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1418
GBP/US$ – 1.5594
GBP/CHF – 1.4144
GBP/CAN$ – 1.6009
GBP/AUS$ – 1.5743
GBP/ZAR – 12.2948
GBP/JPY – 119.57
GBP/HKD – 12.1314
GBP/NZD – 1.9876
GBP/SEK – 10.3982
If your currency pairing is not listed above or you want to make an international money transfer, check out our comparison tables at www.mycurrencytransfer.com
EURO: The 17 member common currency had a mixed day yesterday as investors focused on the Slovakian vote on EFSF that failed in the first attempt in the parliament and the euro rally driven by Sarkozy-Merkel meeting fizzled out. However, the news that the troika EU/IMF/ECB is most likely to sanction Greece’s next bailout package in November brought some relief. Though the euro remained flat against the greenback on Tuesday, the GBP/EUR pair touched 1.1441. The GBP/EUR pair opens at 1.1415 in morning trade.
USD: A mixed bag of British economic data weighed down the Sterling against the Greenback on Tuesday. While manufacturing contracted 0.3% in August, industrial output grew 0.2% during the period. MPC member Alan Posen’s comment that further QEs will be considered by the BoE didn’t help the cable either and it remained below 1.5650 for the whole of the day. The UK employment figures are expected today while the US FOMC September minutes will be out on the other side of the pond. That should shed some light over Fed’s “operation twist”. Bearish sentiment over the Sterling is expected to continue as GBP/USD opens at 1.5597 this morning.
Elsewhere, the AUD and the NZD continued their march against the greenback. The Turkish central bank intervened to halt further lira depreciation as investors pull out of emerging markets over Europe fears. Last week the central bank had sold $1.1 billion to stabilise the country’s currency.
