Ireland Admits Vast Costs To Support Banking Sector

The Euro is remaining strong despite the increasing prominence of Eurozone debt issues. Following large scale strikes and protests over economic policy yesterday around Europe, Ireland has today confirmed the great costs required to support the Anglo Irish Bank. Given wider market themes however, and under-confidence in the US and UK economies, the single currency is for now remaining resilient.

Pound Sterling – UK Markets

The Pound has again remained relatively stable against the US Dollar but is still at four month lows against the Euro, following Bank of England policy member Adam Possen’s comments that the poor state of the UK economy necessitates another round of quantitative easing. This, coupled with Andrew Sentence’s calls for alternative action for an interest rate rise, has caused anticipation of a three way split at the next Bank of England monetary policy meeting with other members. The Nationwide Housing Prices report today has unexpectedly given a slightly better picture than expected, with 0.1 percent month on month growth against a forecast of 0.3 percent decline.

US Dollar – US Markets

Fears that the Federal Reserve will introduce stimulus to deal with the slowing economy is still resulting in a very weak Dollar which has reached fresh five month lows against the Euro. Similarly to the UK, a Federal Reserve policy split is also seeming possible with not all members sure on the idea of future stimulus. Second quarter GDP figures are due to be released later today and are expected to confirm the US economy grew at a rate of 1.8 percent. Weekly jobless claims are expected to have come down to 460,000.

Euro – European Markets

The Euro is still holding out against other major currencies. German unemployment figures had unexpectedly dropped today, but given the rising concerns about wider European debt issues, the Euro’s strength is reliant on the weaknesses in other economies. Public unrest was widespread yesterday as Governments sought to agree their budgets and rules were discussed on placing fees on nations in the future that do not manage their economies effectively. The Irish Central Bank has today confirmed the speculation that it needs to increase support to the banking sector. The cost to support the Anglo Irish Bank will be between 29.3 billion Euros and 34 billion Euros, growing from last month’s estimate of 22-25 billion Euros. The amounts will push the total costs for supporting banks to about 30 percent of GDP in Ireland. Latest GDP figures showed the Irish economy contracted by 1.2 percent for the second quarter, compared to a 1.5 percent drop in Greece. Ireland hopes that now final costs have been disclosed, investors may be reassured that they are able to tackle the problem. Certainly, the single currency is still broadly benefiting from wider market movements and lack of confidence in the UK and US.

Other Currencies – Highlights

The Yen refuses to leave the spotlight. Japan’s Ministry of Finance has revealed that Japan sold 2.12 trillion Yen (25 billion US Dollars) between 28th August – 28th September in an attempt to weaken the currency and maintain an export-led recovery. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000