World Leaders sit to discuss the Eurozone

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Another testing week for the Eurozone and the financial markets put an added expectation on the G8 summit over the weekend. With Greece hanging in the balance, the global economy was looking to the reassuring arms of the G8, more specifically for that “everything’s going to be alright” moment.

The G8 were unanimous on the Greek situation, pledging complete support to see them stay in the Euro. With speculation of exit plans and reports rife throughout week, the message from Camp David was clear, nobody wants to see a Greek default. In an all to familiar debate we saw pressures mount on the German Chancellor to loosen her choke-hold on Greek austerity policy. There is no “one size fits all” solution to help Greece back on its feet, a more patient and lenient hand is needed.

The usual noise surrounding growth ensued, the confirmation and reconfirmation of its importance followed by an inherent lack of actual strategy. Rest assured the primary focus of Wednesdays EU summit meeting will focus on growth and competitiveness for the Eurozone. Spain will no doubt be the agenda as the Bank of Spain announced that the value of bad loans on the books is larger than originally estimated and still getting worse. Don’t be surprised to see the ECB step in this week to help calm Spanish borrowing costs which are close to the point of no return.

Across the pond, Bank of Ireland cut 900 jobs, ironically the day before the Heineken Cup Final, which saw the two Irish teams that BOI sponsor, take the field. While Leinster confirmed their status as the most successful team in European Club Rugby, with a record 42-14 win in Twickenham, the same couldn’t be said for their sponsor.
This may have been a blessing in disguise. With the upcoming referendum at the end of the month, the news has resulted in a stronger “Yes” vote following, by the public. The apparent vulnerability still evident in the Irish Financial system was brought to light. A vote against the treaty would be to sever access to European Funds, a detrimental move considering the uncertainty surrounding Greece and Spain.

Friday brought the much anticipated flotation of Facebook on the Nasdaq. A messy launch saw a technical glitch delay proceedings and affect the order book for the social networking giant. EURUSD finished strongly as the Nasdaq was caught with its pants down. The social media giant did manage to finish the day in the green, just north of its launch price of $38.

BoE Monetary Policy Committee member, Alan Posen stepped down on Friday. Having been one of the looser members regarding monetary policy we expect to the resignation alter the balance of the committee towards a more hawkish outlook.

Quiet start to the week, data wise with UK inflation tomorrow and the EU leaders summit pencilled in for Wednesday.

Latest exchange rates at time of writing

Indicative Rates Sell Buy
GBPEUR 1.23581 1.2384
GBPUSD 1.5790 1.5815
EURUSD 1.2760 1.2785
GBPJPY 125.20 125.45
GBPAUD 1.6045 1.6073
GBPNZD 2.0616 2.0644
GBPCAD 1.6090 1.6118
NZDUSD 0.7558 0.7582
GBPZAR 13.0775 13.1150
USDZAR 8.2610 8.3015
GBPPLN 5.3530 5.3800
EURJPY 101.20 101.50

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