French Agree to Roll Bonds

Risk has rebounded overnight on the belief that European leaders are closer to working out a plan to solve the Greek problem. Yesterday we saw France follow Spain in agreeing that its banks would roll around half of the next 3 years of Greek maturities out for up to 30 years in order to give the Greeks more time to repay the debt. French banks are some of Greece’s largest creditors and will want to have a plan sorted by the time the next tranche of debt is due to paid in early July. This has seen the euro strengthen by 0.2% against the pound and it’s roughly level against the dollar.

The single currency is off the highs this morning after an interview with a Greek MP on Sky News. The parliament member is a PASOK MP and therefore part of the ruling party but instead will vote against his party and the measures. Given the likelihood that the vote will be extremely tight the government needs all the votes it can get. There was little news out of Greece itself yesterday to warrant the euro increasing.

Comments from ECB member Juergen Stark that the ECB is “very vigilant” and “”We are ready not to leave the interest-rate increase from April stand by itself” will have also helped the single currency.

Sterling is a little lower this morning on the news that we will see strikes from teachers’ unions on Thursday. Talks yesterday ended in a deadlock and, should it go ahead, the UK can probably expect more industrial action from the more militant unions over the summer.

Data comes from the UK today in the form of the final reading of Q1 GDP due at 09.30. We are with the market and expect a 0.5% rise in GDP to be confirmed. This should have little effect on sterling although there is the possibility that we see some of the component factors surprise to the low side, particularly those related to the consumer. We also have US consumer confidence at 15.00; no great leaps and bounds forward are expected as the US consumer remains under the cosh of high unemployment and rising prices.

Indicative Rates Sell Buy
GBPEUR 1.1171 1.1199
GBPUSD 1.5943 1.5970
EURUSD 1.4266 1.4290
GBPJPY 128.90 129.18
GBPAUD 1.5249 1.5275
GBPNZD 1.9797 1.9825
GBPCAD 1.5737 1.5767
NZDUSD 0.8057 0.8077
GBPZAR 10.95 11.00
USDZAR 6.8491 6.8788
GBPPLN 4.4492 4.4791
EURJPY 115.45 115.72

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