A couple of weeks of doubt and nerves have been knocking around the currency markets. Sterling to the euro has seen a range of 1.19 to 1.216 and the euro to the dollar has seen the range move between 1.303 to 1.3388 so quite a bit of movement. I suspect for the short term the nerves will still be fraught.
Unemployment numbers in the Eurozone has shown once again how fragile the zone is, with Spain seeing an increase on February’s numbers and now standing in excess of 22% and unfortunately youth numbers increasing the pressure is certainly building on Spain, add this to the ever increasing problem with sale of government bonds and the Eurozone is still wobbling. The rest of the world does not believe Spain will recover alone, the feeling is that by now it should have asked for help from the ECB/IMF.
Recently 10 year bond markets in Spain rose to just around 6% and this is considered the danger zone, furthermore there is a question about how much was purchased by central banks and not private investors. Speaking of central banks the Spanish one had to admit that in March it borrowed 228 bn euros against 152 bn in February, the question is, what are they doing with the money? What does seem clear is that investor money is going into Germany considered to be a safer haven albeit rates only pay 1.72%.
Additional problems for the poor old Eurozone comes from its PMI’s where both manufacturing and the service sector continue to struggle and the concern is that the stronger core countries may not be able to hold up the weaker ones.
Continuing the theme of conflicting information, it’s fair to say the UK is having its problems, manufacturing output fell to its lowest in 10 months, increasing mortgage costs yet reports suggesting house prices are on the increase, really not sure how this happens!!!
To add to the confusion you have Standard and Poor a credit rating agency saying the UK should keep its AAA rating yet Moodys and Fitch suggesting the outlook is negative, if you are not sufficiently confused read on....
Some good news however is that Nissan have announced they are to invest further in the UK so there are glimmers of a brighter future, also it seems that Mr Osbourne is feeling generous as the UK may have provided a further 10bn assistance to the IMF bailout fund.
In the USA economic data continues in its nature to surprise as figures for the US labour market disappoints and Mr Bernanke suggests that the Fed does not see the need for further quantitative easing. Strange isn’t it when your unemployment figures reduce it’s considered a disappointment!
So going forward we are likely to see the focus on Spain and the Eurozone, when will Spain seek support or will it continue to trundle along until the gap gets too big, let’s hope the Eurozone finance ministers come to the fore.
With such conflicting news in the markets if you want to find out how your transfers to and from Spain can work for you, call Moneycorp on 951319700 and tell them Eye on Spain sent you.
Written by: Moneycorp
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