Euro in Greek crisis
As the snow begins to fall here on the Thames you’d be forgiven for believing that the UK is caught up in a whirlwind of unnecessarily spiteful weather out of which we may never emerge. It felt a little something like that in the Euro-Zone last week, as the deficit flies buzzed around the problematic countries that are currently giving the euro plenty of grief. Interestingly enough, the troublemakers have been dubbed the ‘PIGS’ (Portugal, Italy, Greece and Spain) as it is these nations that are expected to continue kicking dirt in the direction of the euro which this week could be to the detriment of the pound due to risk-aversion. Last week sterling wallowed in its own pity as a second wave of post-holiday blues crept in. Investors weren’t buying the pound on Monday; instead they turned extra speculative and began a patient wait for the BoE decision to come out later in the week. Meanwhile the dollar and the euro made some ground against the pound, the former still beaming after the previous Friday’s unexpectedly strong US growth and the latter was lucky to get anywhere at all with the weight of Greece and Portugal’s fiscal problems on its back. A report on Tuesday showed that manufacturing activity came in at a 15-month high, which gave sterling a brief boost. In Australia, news bulletins reported that the Reserve Bank of Australia decided to keep interest rates steady at 3.75%, while it was highly forecasted that the bank will raise borrowing costs by 25 basis points to 4.00%. However, many failed to register this information, instead transfixed by the web-surfing habits of a particularly unfortunate banker who was fired as a result of his antics. Of course, here at Currency Solutions we always have our eyes on the ball, and on Wednesday the pound made a short-lived recovery before once again slipping after a weaker-than-expected reading of the UK services sector. Meanwhile the dollar fell against the euro and The European Commission put their heads together to try and resolve the Greek issue. Thursday provided us with the long-awaited BoE decision, which was to pause stimulus. This didn’t do a great deal for the pound adding to concerns about sterling and the UK's fiscal position. The dollar hit a seven-month high against a host of currencies on Friday, as rising investor risk aversion on fiscal problems in some Euro-Zone countries made the safe-haven currency a far more attractive prospect for traders . The week ahead seems like it will be fairly quiet in terms of data releases. Have a great week.