The eagerly awaited EU summit in Brussels began yesterday evening at 6pm. EU leaders spent most of last night trying to thrash out an agreement on how to move forward with the current financial crisis in what must have been an intense session of talks. Angela Merkel and Nicholas Sarkozy had hoped for a change to the EU treaty in order for closer co-operation among Eurozone members with the main changes to centre on budgetary oversight and a new financial transaction tax.
After around 10 hours of talks David Cameron emerged this morning announcing that the UK had vetoed the EU – wide treaty change as it was not in Britain’s interest “so I didn’t sign up to it”. He had gone into the talks with the aim of stabilising the Euro and protecting Britain’s interests. The main sticking point for Cameron was the proposed changes to financial regulation especially the financial transaction tax which would make the City of London less competitive. There will no doubt be fallout from his decision with Britain’s role in the EU being called into question from Euro skeptics back in the UK and commentators from abroad. The key now is for the remaining nations to come up with an agreement which may involve a separate treaty for participating nations. Any decisions made could change the political map of Europe for years to come and it may be David Cameron’s defining moment as Prime Minister.
It is a fairly quiet day in terms of data today; we have PPI figures out of the UK at 09.30 with figures expected to be slightly worse then last year. The US trade balance is also announced at 13.30 which is likely to show an increase in the US’s trade deficit. This could weaken the Dollar if the figure is worse then expected.
Yesterday we saw a rise in GBP / EUR to levels in the mid 1.17’s and EUR / USD slump to an opening figure of less than 1.33 this morning. If you are a buyer of Euro’s then it may be worth placing your order early today as we expect the Euro to most likely regain some of its losses of yesterday as it reacts to news out of the EU summit and the usual end of week profit taking.
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