Greek Bailout – and a Tumble for Sterling

At GMT 09:30 the UK announced retail sales had come in 0.8 percent lower than expected and in the blink of an eye sterling took an almighty tumble across the board. Across the channel, Greece’s strife is also paining the Euro. In May last year Greece received its first bailout package and agreed to make €30bn worth of budget cuts, however, by the February of this year Greece was told to make further cuts to keep the recovery on track and in April the news got worse as the deficit was revised up to 10.5 percent. This week, Greece has been down graded to a CCC rating and finds itself with until the 29th June to agree a new austerity package. Time is ticking and the Euro is suffering with uncertainty in the ranks.

Pound Sterling – UK Markets

Sterling was riding the temporary and very small wave of stability with the Euro and USD crashing in and around us. Bank of England Governor Mervyn King reiterated this by stating that interest rates should stay on hold because at some point weak wage growth and spending suggest that high inflation will be reversed. However, at GMT 09:30 the UK announced retail sales had come in 0.8 percent lower than expected and in the blink of an eye sterling took an almighty tumble across the board. The royal wedding stimulus really was like a shot of adrenaline into the economy which has now clearly worn off. With equal uncertainty in the Eurozone and US, Sterling may have avoided a worse outcome and is currently trading at 1.1421 and 1.6115 respectively.

US Dollar – US Markets

There is little data due out in the US today however jobless claims will be closely watched. Yesterdays US industrial production was up 0.1% in May which reflected a 0.4% rise in manufacturing, reversing much of April’s 0.5% contraction. The housing market index dropped 3 pts to 13 in June which represents its lowest level since September last year providing further evidence that the US housing market might be showing a continued phase of weakness.

Euro – European Markets

Following some of the worst protests in Greece for over a year, the euro has continued its decline on the back of dampened demand for regional assets. Investors have continued to sell like there is no tomorrow and will continue to do so the longer that talks continue. Adding to the woes, Greek Prime Minister George Papandreou’s has announced plans to reshuffle his cabinet which could lead to another renegotiation of the bail out package. The euro and sterling appear to be playing tug-of-war with each other this morning with sterling starting strong and then being pulled back following poor retail figures. However, the euro has now started to drift back to square one as the core consumer price index figures came in worse than expected. This morning’s movements have outlined just how volatile and fragile the markets are at present. Whilst you can keep an eye on things yourself, speak to your personal broker who watches and monitors rates for you throughout the day.

Other Currencies – Highlights

Whilst the Canadian Dollar has continued to benefit off the back of ongoing issues in the Eurozone, lower than expected factory sales have halted its progress. The Japanese earthquake disrupted auto production and manufacturing. However, since June 8th the loonie has risen 3.1 percent against the euro. The New Zealand Dollar fell across the board as Asian equities extended a worldwide slump in stocks and commodity prices fell. This dampened the demand for higher yielding assets. However, its about timing a trade with a commodity currency to perfection as they are currently highly volatile. Patience is the name of the game in this case.