Euro:
In an already fragile state, the eurozone economy has greatly suffered as a result of this ash cloud. Such is the importance of travel that many businesses have suffered, most notably the airlines with many analysts suggesting loses of up €300million a day as planes are grounded. “This is an unprecedented situation that is having a huge impact on customers and airlines alike,” said BA chief executive Willie Walsh.
Whilst the bailout had the intended effect of cooling the markets, temporarily, it is quite clear that the €30billion will not be enough in the long term. “Greece’s fiscal problem is a long-term issue that is unlikely to be fixed right away,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “It may have to further reduce spending and raise taxes. The bias is still to sell the euro.” On paper this may be the answer but as we have seen before Greece are not keen on austerity measures to pay for foreign debt holders and the social unrest will make any cuts hard to implement. Unfortunately the way forward will not be known until EU ministers can meet up, for the time being we must watch this space, literally.
Pound:
After a drop off yesterday as a result of the ubiquitous hung parliament threat, Sterling has clawed back some losses to start this morning edging towards some key levels. Currently Sterling is at €1.1391 having reached a high of 1.1412 in today’s trading, hopefully the pound will have the momentum to remain above the 1.1400 levels for the longer term.
The same can be said for GBP/USD, currently trading at $1.5353 having seen lows of 1.5190 at 11:00GMT yesterday. Downward pressure on Sterling will continue for as long as British finances remain ‘Greek like’ but any upside movement will be jumped upon by those looking to take advantage of a preferential exchange rate in quite uncertain times. Sterling is subject to market sentiment and technical analysis and as such a fall below 1.5100 will test the 1.49 levels, on the upside 1.5400 looks to be a resistance level for the short term. Against the Euro Sterling is more range bound as the volatile nature of the eurozone will see the pairs trading between 1.1260 on the downside and 1.1420 on the upside. A high of 1.1412 may even be the intraday high for today.
US Dollar:
We start this morning relatively unchanged as the major pairs hold firm for the time being. Mixed global events see traders hold their positions as the chaos from the unpronounceable volcano has caused greater than expected problems in Europe. Thus far investors are holding the dollar before weighing up how to proceed given debt problems in Greece as well as the fraud allegations against Goldman Sachs. Morning trading sees the dollar marginally down on Sterling but marginally up on the euro at £1.5361 and €1.346 respectively.
Yesterday was a quiet day on the macroeconomic front and today is much the same, at 16:00GMT Ben Bernanke testifies which can lead to market volatility if there is a hint as to when interest rates are likely to change. Thus far the tone remains dovish as recovery is still lacking robust features. The steady stream of improving data has caused some speculators to take the view that base rates may rise in the second half of this year rather than 2011 as initially expected. A rise in stocks in the U.S. gave some support to the dollar but the Australian dollar took most of the gains as interest rates were put up in Australia in order to curb inflation on the back of the current mining boom.
McCormick Says Goldman Sachs Lawsuit Is `First of Many’
Quote
“Life is like a coin. You can spend it any way you wish, but you only spend it once.” – Lillian Dickson
