Headlines about the catastrophe in the eurozone are not new however they have certainly resurfaced with a vengeance this last couple of days and the markets have been spooked by the lack of clarity of the terms of the recent Spanish bailout of 100 billion euros. That said Mr Rajoy has for quite some time been saying that prior to going cap in hand he wanted to understand the Banking report currently being prepared by auditors.

Therefore not unexpectedly following the bailout we saw confidence in the zone improve and last for about 4 hours before markets starting seeing a rot return with the euro, oil, gold and commodity prices losing the day’s gains. So with Spain clearly back in the spotlight and bond yields running at an extremely dangerous high level of around 6.9% fear within its banking sector set in again and we saw a run on cash withdrawals from Spanish banks.

Mr Rajoy did suggest that by receiving the funds it should be a cause for celebration, the public are not convinced, furthermore credit rating agencies are not impressed and Moodys and Fitch both took action and cut Spain’s credit rating to a status just above junk although they could not agree as Fitch decided it should be cut to a level 2 notches above junk whilst Moodys were less optimistic and cut their rating to 1 above junk status. Now the problem here is that “junk” status removes the ability for raising new money. Italy are experiencing some backlash from the uncertainty as rates on their bonds also rose to a dangerously high level which puts pressure on another eurozone country and its banking system which the ECB is particularly is keen to avoid at time when it has seen an increase of 8.5 billion euros being lent to banks during the last week. Maybe the additional funds were to support the run in Greece where it is being suggested that up to 800 million euros a day is being withdrawn ahead of the election that takes place on the 17 June. With Cyprus also going cap in hand to the EU for a bailout of 4 billion euros pressure is certainly building within the zone.

In an attempt to restore confidence The German government via Chancellor Merkel has recently begun opening the door to a policy of shared debts and explore proposals for a 2.3 trillion fund to stop the euro crisis escalating.

Elsewhere we have evidence that the job market in the UK is not a rosy one as the demand for temporary and permanent workers fell last month off the back of the issues within the Eurozone. To compound the situation Mr Tucker who is the deputy governor of The Bank of England has said that weak growth in bank lending remains a serious concern because households and businesses relied on these loans. Wow startling news particularly when your average person has been shouting for ages that banks are stopping them form borrowing!! With monetary policy left unchanged at the last meeting in June, the question now is, for how long? With increased risk in the eurozone are the BOE holding back on printing of money just in case!!! 

With other news around the globe not healthy as manufacturing slows in China and retail sales in the states not as expected then we have a negative outlook sitting in front of us all. Not to worry we have been here before many times of late.

The markets will watch with baited breath the results from the Greek election and all could change depending on the result.

Exchange rates during the last month have seen ranges as follows:

        High    Low
£ to $        1.6075    1.5284
£ to Euro    1.2547    1.2247
Euro to $    1.2323    1.2853

If you want to make the most of your currency transfers call Moneycorp on 951319700 and tell them Eye on Spain sent you.