Spain agree to aid, markets breathe sigh of relief for now

tony nguyen

It was another working weekend in the Eurozone with Spain bowing to pressure from the markets and the rest of Europe to apply for aid to shore up its tattered banking system. Details are still being worked out behind the scenes but the notional amount of EUR 100bn has been enough to give markets a shot in the arm to start today’s trade with EURUSD surging back above 1.26 and GBP- EUR heading towards the 1.22s.

The difference between this bailout and the Irish for example is that the money does not come with significant austerity measures attached. Spain has been able to get to the table and make sure that it got itself a good deal and didn’t immediately yield to what the Germans wanted.

As we have said above, there is a fair lot of conditionality to be announced on this deal and that will be the key to either the extension or deterioration of this rally. At the moment however, it seems that it is only going in one direction.

Elsewhere, George Osborne wrote an article in yesterday’s Sunday Telegraph detailing how the UK recovery was “being killed off” by the Eurozone crisis. While we agree with the Chancellor that the crisis is a significant drag on the UK, and particularly the export sector, to say that it is the main reason is slightly disingenuous. Wage growth is nowhere near inflation, consumer confidence is still near historic lows over job security fears and therefore, people just aren’t spending money. It’s not always your fault but sometimes the reasons are found at home.

Risk has also been driven on over the course of the weekend by data from China which suggested that the world’s engine room, while slowing, is not crashing as some had thought. China cut interest rates last week for the first time since 2008, prompting fears that the authorities were expecting a significant fall off in growth. While retail sales and industrial production were pretty much bang on consensus, exports were a lot stronger than expected while inflation also fell back, leaving room for the Chinese authorities to act more if they deem it necessary.

Indicative Rates Sell Buy
GBPEUR 1.2312 1.2339
GBPUSD 1.5519 1.5544
EURUSD 1.2590 1.2613
GBPJPY 123.36 123.65
GBPAUD 1.5572 1.5597
GBPNZD 2.0017 2.0044
GBPCAD 1.5870 1.5900
NZDUSD 0.7743 0.7765
GBPZAR 12.87 12.92
USDZAR 8.2786 8.3226
GBPPLN 5.2713 5.2978
EURJPY 100.09 100.36

Please note these rates are “interbank” rates they indicate where the market is currently trading and are not indicative of the rates offered. Rates are dependent on amount transacted. It is important to remember that foreign exchange rates fluctuate all the time. The rate you will receive will depend on the amount and currency you require. Please call for a live quote or login in to your Online Account

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Spain agree to aid, markets breathe sigh of relief for now

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