Today is deadline day. Or is it? If you could let me know that'd be appreciated. Europe seems to be struggling to appease the world in their collective efforts to subdue the debt crisis. If Greece default then contagion is almost certain and will harm Italy, a high likelihood of France being involved, the Banking system would be in disarray and as the Global economy is now so interlinked it would spell disaster. This is potentially far far more serious than 2008. A number of things are sensationalised in the media however for once this isn’t one of them. Greece are looking for bond investors to accept ‘voluntary losses’ as high as 60 per cent with a further 109 billion EUR from the IMF and Euro Governments just to meet their bills. I think agreement will be reached on many of the issues as I believe that the Euro is simply “too big to fail”. Whether it should be saved is an entirely separate debate. So, where do things stand at present? Well, the finance minister’s meeting that was scheduled to precede the summit has now been moved to an as yet unknown time after the summit. It doesn’t inspire too much confidence and only reinforces the view that agreement is far from being reached. They’re still dithering in my opinion and not taking the swift and forthright action that is now required. All the right noises have been made over the past few days however until all details have been unveiled it’s all empty promises. I’m sure back in July that was the final package? We’ve been here before and I’m sure at some point in 2012 we’ll be back here again. If Europe doesn’t release initiatives that stun the market as we’re looking for something that really ‘kick starts’ things then I think the market once it’s digested the news will feel a little less enthused.
EUR/USD has been flirting with the 1.39 level and we’ve not seen any clear movement on this pair in either direction. We seen a dip down to the 1.3850 level on the release of the cancellation of the EcoFin meeting however it bounced back up to previous levels. The EUR is trading at a quite frankly ridiculous level with all the comments/rumours floating around the market. The EUR seems completely immune to any form of bad news. In saying that, investors are still in cautious mode as the divisions between Germany and France persist. EUR has been holding firmly against various crosses however we’ll see volatility later today and for the remainder of the week. I still see a sell off in the EUR as I think we’re in for a major disappointment from Europe.
GBP/USD has continued its climb however it’s looking quite toppish at these levels around the figure. If you’re a buyer of USD then securing at this level would be no bad thing as we’re trading on dollar weakness on this pair. GBP/EUR continues to cough and splutter between the 1.14 and 1.15 level with it being stuck in no man’s land and largely dependent on EUR weakness to drive the pair higher. If you can achieve the 1.15 level through a market order I think you’ll be getting close to the high on this pair as any spikes should be taken advantage of. Please contact to discuss.
In terms of economic releases today we have of course the summit taking place so that is the markets focus. Out of the US this afternoon we have Durable Goods orders released and New Home Sales. Out of Canada, we have the BoC Monetary policy report and out of New Zealand we have the RBNZ interest rate decision finishing up the day in terms of data.
I’d look to put market orders in at certain levels over the upcoming days as we could see major market movements that you could take advantage of. Please contact to discuss various options on your particular currency pair.
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