Europe Gets Moody With Greece

Maintaining the ongoing focus on Greece, credit rating agency Moody’s has raised the risk of a default by 50 percent. As European officials frantically put together a second bailout package in two years, Moody’s spent their time downgrading Greece from B1 to Caa1. In short, whilst restructuring is unlikely in the short-term, there is still a high possibility that Greece may eventually default on loans given to them. Pound Sterling Data out of the UK today showed that construction not only expanded at a faster pace in May than in April, it did so faster than expected. Whilst sterling yesterday snapped three days of consecutive losses versus the greenback, news today was expected to have further impact on our currency. However, we shouldn’t be surprised that it made very little difference to sterling’s performance and we expect yet another day of mundane movement. Reverting to my pessimistic ways, it has been suggested that Britain will endure the slowest uptake in consumer spending in any post recession period in history. A combination of high inflation, tax rises and little to no wage growth will mean that the average UK household will be spending 5.4 percent more than they were in 2008. Dollar Reports coming out of the US yesterday revealed that manufacturing grew at the slowest pace in more than a year in May. Furthermore, revelations that employers added fewer jobs produced a wave of poor data which reflected badly on the US Dollar. Debt concerns in the nation are still rife and even after their second $600 billion round of asset purchasing the future is still uncertain. Euro German Chancellor Angela Merkel has come out all guns blazing stating that the EU remains committed to its shared currency and that (perhaps unsurprisingly) Germany’s outlook for growth is “very positive”. On the back of this statement the euro gained across the board and has made very steady gains against sterling, which is now looking slightly shaky against the single currency. Other Currencies – Highlights Whilst the future does not look as bright for Australian Dollar, the so-called Aussie clawed back some losses earlier as retail sales rose by 1.1 percent in April compared to the previous month. However, falling Asian stocks is still dampening the demand for higher-yielding assets – something the dollar has relied on so heavily in previous years. One of the world’s fastest growing economies has taken a slight hit over the past few days. Brazilian interest rate futures contracts fell for a sixth day after reports showed inflation decelerated more than forecasters predicted for May. Slower growth will cause commodities to decline and thus hurt the local currency.