Ireland and Hungary in Debt Crisis

The week is beginning with Europe the spotlight. Moody’s have downgraded Ireland’s rating and the EU pulled out of talks with Hungary regarding a 20 billion Euro finance package.

Pound Sterling – UK Markets

Sterling gained on the Euro over the weekend but has experienced a significant drop so far this morning and is also undergoing volatile movements with the US Dollar. Speak with your broker to discuss any upcoming transfers. A July housing report by Rightmove PLC has shown the first monthly drop in house asking prices since December of 0.6 percent. Rightmove have suggested that the rise over the last 6 months was a temporary peak with the downward trend now expected to continue with a forecasted drop of 7 percent over the second half of the year. This has been attributed to the Government’s budget cuts and tighter lending rules which have unsettled consumers. There are now three times as many homes entering the market every week as the amount of mortgages granted. There is increasing debate circulating regarding the suitability of the Chancellor’s austerity measures. Although the emergency budget initially provided a strong boost for the Pound, there are signs the positive mood is evaporating with Osborne’s meetings with EU finance Ministers last week encouraging several economists to speak out about the over-emphasis on cuts rather than growth. The first UK data release will be tomorrow when the latest public finance figures are announced. The main focus this week for the UK is likely to be Friday’s second quarter GDP figures which are expected to indicate a growth in the economy as well as the results of the stress tests on Friday.

US Dollar – US Markets

The US has continued with its run of gloomy data as both a consumer sentiment report and earnings statistics released at the end of last week failed to meet expectations. These recovery doubts have put further pressure on the US Dollar which so far today has undergone volatile movement with both the Pound and the Euro. Over the weekend, President Barack Obama called on Republicans to stop blocking legislation in the Senate targeted towards extending unemployment benefits and helping small businesses. The well known billionaire investor George Soros has also spoken out about current policies suggesting that it is too early to reduce stimulus measures as the recovery is still fragile. US NAHB housing market index figures are due towards the end of today and are expected to reveal further declines.

Euro – European Markets

The Euro is undergoing extreme volatility following three new key developments since Friday – disappointing trade balance figures, the cut of Ireland’s rating by Moody’s and the withdrawal of a finance package with Hungary. Moody’s cutting of Ireland’s rating from AA1 to AA2 was widely anticipated. The ratings agency have said that the move was due to the Government’s loss of financial strength but is another weight on the shoulders of the single currency as proof of the spread of the debt issues. The European Union and International Monetary Fund ended talks to arrange a finance package to help Hungary. This is said to be due to unresolved issues in terms of the debt reduction targets that Hungary must be able to meet. This has triggered the Hungarian Forint to weaken hugely against a basket of currencies.

Other Currencies – Highlights

The Brazilian Real is making news as economists predict a slump – speculation over a stimulus slow down in the US and in particular China, Brazil’s largest trading partner, has dampened demand for the currency. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.