Tag Archives: spanish
Spanish Borrowing Costs hit Record High but Rumours of Further QE Hindering GBP
The euro has had a turbulent ride since the start of 2012, as it has fought against the stigma and public backlash created in the region by high levels of debt, growing unemployment and poor growth forecasts. With so much negativity surrounding the EU it is no wonder the single currency has struggled to make any serious inroads against the major currencies, as seemingly any positive news is quickly followed by further negative reports of another faltering economy (enter Cyprus).
We are now approaching somewhat of a crossroads, as the Greek election results on Sunday could well map out the short-term future of the single currency and how it will respond in the coming weeks against GBP and the USD in particular. We initially had been hearing noises coming from Greece that the anti-austerity Syriza party were leading the way and could well become the majority party. If these rumours are ultimately correct we could see some initial EUR weakness, as further uncertainty will grip the markets. The lingering feeling is more than likely to be that if there is no agreement on austerity, then surely the agreed bailout fund will be removed and Greece will ultimately default on their debts. The only question that’s left then is how can Greece remain in the EU?
However, as with most political elections all is not quite as it seems and today we have been hearing further rumours that in fact it may be the pro bailout party that is leading the race. If this is accurate then we could potentially see EUR strength, as the markets could see it as a sign of intent that the new Greek government really will be doing everything necessary to remain a functioning part of the eurozone.
Spanish 10 year bond auctions hit a new record high today at over 7%, the level Greece, Ireland and Portugal were at when they required bailouts. Therefore don’t be surprised if the 100 billion euro that has been earmarked for Spain’s recovery will more than likely be the first of many tranches, as in my opinion 100 billion would not even cover the money that has been taken out of Spanish banks in the past three months!
At time of writing GBP/EUR rates were sitting 1.2320, down over a cent on yesterday’s trading. This could be partly due to the rumours circulating regarding Greece and the pro bailout party, along with yesterday’s rumours here in the UK that we may be in line for another round of QE (Quantitative Easing) before the end of the year.
If you have an upcoming currency requirement or would like to be kept up with the latest market movement, including the latest news on Greece and the Spanish economies please contact me directly at mtv@currencies.co.uk or on 01494 787 478.
Spanish bailout eases market tension but Euro strength quickly eroding
This weekend the announcement came that the cynics amongst us had been predicting for months and even the optimistic had accepted was imminent. 100 billion euro has been made available for a Spanish bailout, should the countries flailing economy need it. The announcement saw some much needed confidence return to the single currency and the euro made early gains against a basket of currencies, during Monday morning’s trading.
The euro has been struggling of late, particularly against the USD, as the regions woes continue to leave investors bereft of confidence. It has struggled to fight against the greenbacks reputation as a ‘safe haven’ currency (due to the fact the Dollar holds its value better than other currencies in times of global unrest) and due to this EUR/USD levels have been trading near a 52 week low for some time. We did see some relief this morning but any short-term gains were quickly eroded and in fact at time of writing we have seen some USD strength.
GBP/EUR levels also spiked off the back of the announcement and even moved below 1.23, with the single currency showing signs of a genuine fight-back. However, once again the early morning strength was quickly erased and at time of writing GBP/EUR levels were back up around 1.24 and holding firm.
Personally I believe investors have ‘heard it all before’ when it comes to bailout packages and only need to look to Greece as an on-going example of the additional problems they can create. In my opinion 100 billion EUR is not enough to secure Spain’s economic future within the eurozone. With Cyprus now looking as if it will be the next country to request a bailout and with Greece’s political future no closer to being resolved, I still feel there are many dark days ahead for the euro. However, any confidence in our own economies ability to recover during 2012 are also fading, as UK growth forecasts are cut and further monetary stimulus (Quantitative Easing) over the coming months becomes increasingly likely.
If you have an upcoming currency requirement, or would like to be kept up to date with all the latest market movements then please contact me directly at mtv@currencies.co.uk or on 01494 787 478.
