Investors appear to be coming out of hiding, as shares climbed yesterday amid new hopes for a eurozone rescue plan. Stocks rose strongly on growing optimism that eurozone leaders, along with the International Monetary Fund, will agree a package designed to solve the debt crisis. One of the main aspects of the bailout will involve a 50 percent write-down of Greek government debts. Another key area of improvement is set to include strengthening big European banks that could be hit by any defaults on national debt obligations. The question still lingering in my mind is whether this is a long term solution, or simply a short-term quick fix to buy a bit of time?
Pound Sterling – UK Markets
The UK has stayed out of the headlines today, with little notable data being released and very few announcements due in the markets. We will be keeping a close eye on events either side of our little island, with Greek debt nearing a resolution and a busy week in the US that will give us a better idea of whether the worlds largest economy is slipping back into recession. Sterling, on the basis of little national data, has crept forward in the right direction – ‘crept’ being the key word.
US Dollar – US Markets
Economists worldwide are expecting figures due later today to show that home prices declined in July from a year earlier, caused by an imbalance between supply and demand that shows little sign of easing. High levels of unemployment, stagnant wage growth and falling stock prices are combining to make this a very poor housing market. Potential buyers are holding off just as foreclosures swell the number of properties on the market. This was one of the reasons the Federal Reserve initiated ‘Operation Twist’ last week.
Euro – European Markets
Greek Prime Minister George Papandreou will hold key debt talks with German Chancellor Angela Merkel later today, to discuss his country’s progress in cutting its budget deficit. This latest instalment, in what would make an extremely drawn out novel, comes as policymakers twiddle their thumbs and debate whether or not to release the latest tranche of Greek bailout funds. However, looking at the markets today, investors appear to be confident that a conclusion will come sooner rather than later. Whilst the euro is not benefitting from this, European stocks and shares have been bolstered overnight.
Other Currencies – Highlights
Whilst renewed confidence in the eurozone is allowing those hardest hit over the past week to make a strong recovery, the same cannot be said for the Brazilian Real. Traders worldwide are betting central bank President Alexandre Tombini will cut interest rates by the most in two years, to shield the economy from the European banking crisis. The Brazilian Real consequently fell sharply against the majority of its major counterparts.