Mike Paterson’s daily Forex brief
After 13 hours of talks that lasted well into the early hours of this morning EU leaders finally released their communiquÃ© agreeing to use the Eurozone’s bailout funds to support banks directly without adding to sovereign debt. There are also plans for the ECB to become the overall supervisory body in December.
German Chancellor Merkel left the summit without making a statement but its seems clear that she has conceded much to the demands of Spain and Italy with the French leaning heavily on her too but, as ever, it’s not quite that simple. Germany has long argued for greater control out of Brussels over the finances of EZ countries and this will be the trade-off.
The deal is due to be ratified in July and there are still areas of concern but the markets have rallied strongly in their usual knee-jerk manner, but definitely cheered by some sort of deal that was considered highly unlikely going in to the summit yesterday.
EURUSD rose almost 200 tics to 1.2628 dragging EURGBP up to 0.8089 (GBPEUR down to 1.2361) before we saw a bout of profit-taking/rationalization and we’re currently back to 1.2583 and 0.8047 (1.2421) respectively. EURCHF also flew up to 0.9661 and EURJPY 100.53.
Whether this rally is sustainable is now the debate. I still say sell rallies as there’s far more to be addressed but yes this is a start if workable.
GBPUSD headed higher in the rally but the Pound has fallen across the board generally amidst more revelations on the LIBOR fixing and now another scam emerging that SMEs have lost thousands in protection money derivative policies with the banks.
In an evening of sporting shocks we saw Germany humbled by Italy with wild-child Balotelli in irrepressible form, while Nadal was handed an early exit from Wimbledon by debutant Rosol ranked 100 in the world.
England’s cricketers today take on the Aussies at Lords in the first of the ODI’s which is where I’d be in my customary viewing position from a Pavilion watering hole were I not just about to drive down to Gosport to join the crew of Eleanor to take part in the Round the Island Race. www.roundtheisland.org.uk. Full report on Monday!
Have a great weekend, where ever it takes you. And Happy 24th Birthday to my dear son Jack. Have a great day mate.
Interbank Rates 08:52 BST
Today’s Data: BST
09.30-UK – Index of Services
10.00-EU – Eurozone CPI
10.30-UK – BOE Governor King speaks
13.30-US – CPI / Personal Income/ Spending
14.45-US – Chicago PMI
14.55-US – Michigan Consumer Sentiment
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