pending cuts started to create a divide in the Eurozone.

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Yesterday had an air of rebellion about it, as tensions over austerity and spending cuts started to create a divide in the Eurozone. The German Chancellor softened her once rigid opinion, admitting that austerity isn’t the sole answer to the crisis but it was very much still the backbone.

The Dutch coalition government was split down the middle. Wilders, who is leader of coalition socialist minority, pushed to dilute deficit reduction into 2013, saying it’s a choice between Brussels or the People. Rutte (Ex-PM but currently acting as caretaker PM) confirmed that a draft of the 2013 budget will be presented to Brussels by April 30th as originally proposed and that the government will make good on its austerity plans. A meeting has been arranged for next week to set an election date and to proceed with budget talks. A successful bond auction saw EUR 1.995bn raised with average yields lower than last time around, offering somewhat of an upbeat reassurance that the Netherlands had the situation under control.

Further contraction of the Greek economy is expected for 2012; with elections to be held early next month there is a worry that political turmoil will push Greece even further off the beaten track on the road to meeting targets. The Head of the Bank of Greece stressed the importance of adhering to the spending cuts, confirming it was the best way forward for Greece. This reopened discussion of a controlled Greek default and exit from the Eurozone.

GBPEUR gained in the morning session as mediocre, higher cost peripheral auctions pushed the rate to a new high of 1.2275. A full order book for EFSF (European Financial Stability Facility) 7-year bonds in the afternoon saw a moderate EUR rally with GBPEUR retreating back to 1.2215.

Eagerly anticipated Q1 GDP figures due this morning are set to seal the UK’s fate. Significance has been talked down all week as the BoE and the government brace for the impact of possible contraction for a second consecutive quarter. While the stats will set the tone they don’t necessarily paint the entire picture; the UK has been moving in the right direction as of late, despite increasing inflation figures earlier this month. Weak construction figures will be the villain today which will eclipse the successful debt reduction, lower unemployment figures and increased consumer spending we have seen recently. Big GBP movement is expected throughout the course of the day, as of yet it’s not clear what direction that will be.

The FED meets later today to decide whether or not to hold interest rates where they are. With poor data recently showing struggling growth it remains likely that we will not see a hike in interest rates. A word on further QE is likely. The meeting comes just days after S&P’s rating agency downgraded the world’s largest economy from its coveted AAA rating.

Latest exchange rates at time of writing

Indicative Rates Sell Buy
GBPEUR 1.2220 1.2246
GBPUSD 1.6125 1.6150
EURUSD 1.3178 1.3200
GBPJPY 131.25 131.50
GBPAUD 1.5635 1.5664
GBPNZD 1.9890 1.9915
GBPCAD 1.5915 1.5943
NZDUSD 0.8095 0.8121
GBPZAR 12.5360 12.5815
USDZAR 7.7660 7.8040
GBPPLN 5.1160 5.1413
EURJPY 107.28 107.53

Please note these rates are “interbank” rates ie they indicate where the market is currently trading and are not indicative of the rates offered by World First. 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.

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