Euro wobbles as debt crisis continues

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The currency markets are shaky after the International Monetary Fund (IMF) stated yesterday that the global economy has entered a "dangerous new phase" of sharply lower growth. The organisation warned that continuing political and economic woes in the US and eurozone could force them back into recession. The IMF slashed its growth projections for the eurozone down from Junes predication of 2% to 1.6% and next year it forecasts that growth will be 1.1%, down from 1.7%.

Despite the Greek finance minster stating that good progress has been made in taking steps to manage the debt crisis, European stock markets have opened on a weak note today with the banking sector concerned about its exposure to Greek debt. Confidence about an agreement in Greece is fading fast and it looks like it will be a case of when Greece defaults rather than if. The bank of China has historically been a big market maker in currency but has stopped forex trading with several European banks due to the Eurozone crisis.

Clearly the debt crisis is a major focus but looking for some positives; Ireland shows that austerity measures do work to some level. Although this might not seem the case to the record high unemployed, as far as Irelands creditors are concerned yields on its 10 year bonds are acceptable and there is a small glimmer of light at the end of the very long, dark tunnel.

The focus isn’t just on the euro zone and the UK growth for 2011 has also been revised downwards from 1.5% to 1.1%. UK MPC minutes are out today and whilst it looks inevitable that the vote will be 9-0 in favour of leaving rates on hold which is great for mortgage holders, the minutes will be scrutinised for indications of another round of quantative easing.

With all the uncertainty in the market, pressure is building for Sterling/ Euro exchange rates. If you have a currency transaction to make protect yourself from rate fluctuations or find out how you can take advantage of sudden exchange rate volatility by speaking to Moneycorp today. The service is free and without obligation or 020 7589 3000

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Euro wobbles as debt crisis continues

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