Thursday 27th October 2011
Good morning. Leaders from all 27 European Union nations have finally thrashed out a deal to solve the crisis started by concern over how Greece would cope with its debts. We'll look at the details of the deal shortly, but in short the net effect is a stronger Euro, pushing GBP/EUR rates lower by a point already. At 08:30am this morning rates are as follows:
• GBP/EUR 1.1424
• GBP/USD 1.5999
• GBP/AUD 1.5190
• GBP/NZD 1.9805
• GBP/CHF 1.3992
• GBP/CAD 1.5983
• GBP/ZAR 12.5133
• GBP/JPY 121.42
• GBP/DKK 8.5032
• GBP/NOK 8.7618
• EUR/USD 1.4002
Eurozone deal agreed
The eurozone have finally agreed a deal on expanding the bailout fund and banks taking losses on Greek debt in exchange for recapitalisation. The news last night was greeted positively by the markets, with shares gaining in Asia overnight, and the Euro gaining strength of around 1% against the US Dollar, and around 0.6% against Sterling, pushing GBP/EUR rates lower.
The reason Pound vs Euro rates didn't fall more is because Sterling has also strengthened slightly on the news, due it's close ties to the Eurozone and the fact it's a risky currency.
Greece, the Irish Republic and Portugal have all required bailouts and this last week of talks was prompted by fears the crisis would spread to the larger economies of Spain and Italy. I'm actually surprised there was a resolute announcement last night, as we were expecting more of a woolly agreement with no clear details being shown for a few weeks.
However, late on Wednesday night and early on Thursday morning, the EU leaders meeting in Brussels agreed to expand the eurozone's main bailout fund to 1 Trillion Euros. Banks also accepted a loss of 50% on Greek debt, and they must raise more capital to protect themselves against losses resulting from any future defaults.
EU leaders said measures to restore confidence in the bloc's banks "are urgently needed and are necessary in the context of strengthening prudential control of the EU banking sector".
It will be interesting to see if this is the final word on the crisis, or if it is just another temporary measure that will not last. For the moment markets like the news, and as a result Pound Euro rates are falling.
Today's Data
Inflation figures today are released by Germany. Staying in the EU we will see Money Supply data. Of course the on-going debt crisis will continue to be the main driver in the value of the Euro. In the UK there are consumer confidence figures. In the USA markets will be closely watching the numbers released at lunchtime: Gross Domestic Product, Home Sales and Unemployment data.
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