Good morning. The European Union remains undecided over it’s next course action, forcing global markets to behave like proverbial headless chickens. After yesterday’s announcement that the next tranche of bailout package for Greece will be delayed, markets worldwide nosedived. Surprisingly however, American markets had recovered by yesterday’s close. The reason? Well, FT reported that European finance ministers are looking to recapitalise their banks. Now that’s smart thinking in our opinion. Greece is most likely to default despite sinking in hundreds of billions of Euros. At least the European banks that hold substantial Greek bonds will be able to survive the shock loss when Greece defaults.
“There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the member states,” said European Commissioner for Economic Affairs Ollie Rehn to FT after the meeting of European finance ministers in Luxembourg.
“There is a sense of urgency among ministers and we need to move on. Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty,” he added.
Let’s hope they act fast. Talk is cheap.
Franco-Belgian bank Dexia is in the headlines and looks set to break apart, with its debts being split into a Northern Rock-style ‘bad bank’ based in France and deposits being guaranteed by both Belgium and France.
Overnight Italy suffered its second ignominy in as many weeks after Moody’s cut its rating by three notches. Things are unlikely to improve soon for Rome as the political circus plays out in full sway and ringmaster Berlusconi in firm control.
The economic activity gains pace with services PMI numbers from the US, UK and EU due today. The all-important US ADP job data is also due today.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1578
GBP/US$ – 1.5432
GBP/CHF – 1.4220
GBP/CAN$ – 1.6253
GBP/AUS$ – 1.6141
GBP/ZAR – 12.5478
GBP/JPY – 118.41
GBP/HKD – 12.0182
GBP/NZD – 2.0254
GBP/SEK – 10.5872
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 single currency made gains yesterday despite making a poor start. It gained against the greenback and the Sterling after Ben Bernanke announced that the US Fed will support the economy, increasing chances of another round of quantitative easing. The singles currency opens higher today morning against the USD and the EUR/USD pair sits on 1.3307. The GBP/EUR pair is also a little off the recent highs and opens at 1.1619.
USD: GBP touched its lowest level in a year against the USD as UK construction activity hit its lowest point in 10 months. GBP/USD pair opens at 1.5430 today morning.
Elsewhere, the Swiss Franc fell to its lowest in six months against the USD. Franc also lost ground against the Euro after rumours spread that the Swiss National Bank will devalue the currency further. The AUD and NZD both gained against the greenback yesterday. Sterling also weakened against the antipodean currencies yesterday and the GBP/AUD and GBP/NZD pairs open today at 1.6150 and 2.0286 respectively.
Have a great day.
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