Mike Paterson’s daily Forex brief
As I signed off yesterday I was talking about the Euro coming under pressure again as the Eurozone reality check kicked in once more (dÃ©jÃ vu from last Monday) and we’ve seen further declines as Greece try to form a government and Spanish bond yields reach an unsustainable 7.2%.
In Greece, New Democracy, Pasok and the Democratic Left are poised to agree on a coalition today, which would give them a 29-seat cushion to maintain a majority. Pasok leader Venizelos is pushing for Syriza to be included in the coalition but said he agreed on the need for an immediate government, meaning that clearly won’t be a stumbling block.
Meanwhile as the G20 met in Mexico, obviously not coming to save the day, Spanish bond yields once again rose through 7%, the rate which is generally agreed to be unsustainable for debt to be repaid. Italian bond yields also rose sharply and this morning the G20 have come out with their usual “tut, tut, you guys really must do better but we’ll try and help if we can” communiquÃ©. Thanks for turning up.
Having peaked at 1.2748 in the immediate aftermath of the Greek elections EURUSD has been down to 1.2558, dragging with it EURGBP to 0.8024 (GBPEUR up to 1.2464) before finding a few buyers.
We’ve seen the good two-way business that I expected at these levels though as traders try to second-guess the next decent move. There’s plenty of interest to sell the rallies and at yesterday’s afternoon fix we saw “real money” (pension funds, insurance companies et al) sell a truck load of Euros to give it another slap lower.
Overnight in China we’ve had evidence of a slowing economy and slowing down of expectation, particularly in the housing sector. It’s all very well the IMF saying the BRICS nations will come to the rescue but they’re having problems of their own after their recent growth explosion.
The Pound’s a mixed bag but generally weaker across the board (EURGBP excepted) and we’ve seen a little bit more selling in the past few minutes after the release of lower than expected inflation data.
Tonight it’s time to get the jingoistic flag-waving going again as England take on Ukraine in the deciding Euro 2012 Group match, with Mr Rooney being lined up to be the all conquering hero. No pressure there then but his last tournament goal was in 2004. Hey ho though, we’ll cheer and cheer and hope.
Meanwhile back in the real world cricket mourns the untimely death of rising star Tom Maynard, son of ex-England player Matthew, in circumstances still to be clarified but which appear to be a tragic accident.
‘Tis indeed a strange ol’ world.
Interbank Rates 08:43 BST
Today’s Data: BST
09.30-UK – CPI / RPI / DCLG House Price Index
10.00-EU – German ZEW Economic Sentiment / Eurozone ZEW Economic Sentiment
13.30-US – Building Permits / Housing Starts
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