Pure FX Blog

13 February 2012

Greece Bows To EU Pressure For More Cuts

Here is our account of the political and economic factors that affected the exchange rates over the weekend. To find out how they affected your currency transactions, don’t hesitate to contact us.

Exchange Rate Changes

This is a table of the gains in currency you could have achieved in the past month, trading at the high compared to the low:

GBPEUR: +1.269%
GBPUSD: +3.935%
GBPCHF: +1.316%
GBPAUD: +0.798%
GBPNZD: +0.652%
GBPCAD: +1.571%
EURUSD: +5.086%

It looks like a good morning for the Australian and New Zealand dollars against sterling.

Risk appetite is rising, as over the weekend Greek ministers overcame unprecedented opposition from MPs (not to mention widespread public rioting) to agree more EU-imposed spending cuts. This brings Greece one step close to receiving its second EU bailout, something urgently needed to prevent the nation defaulting on its bond repayments in March.

The Greek government passed measures including a draconian 22.0% cut in the minimum wage, as well as promising to slash 150k public jobs by 2015. It did so in spite of opposition from more than 40 MPs (who felt unable to condone the measures, and were subsequently expelled) plus the resignation of the Minister for Public Order, who found himself overwhelmed by the unprecedented public rioting. The cuts come though Greece has been in recession since 2007, and is already enduring a horrible 21.0% unemployment.

Looking ahead, this crisis in Greece could continue to dominate the market. This is because, though the Greek parliament has passed these measures, EU officials no longer take Greece at its word. Coalition ministers must now personally pledge to implement these cuts and take steps to do so, before officials dispense the second bailout. On the one hand, this reflects frustration inside the European Union at the glacial pace Athens is getting things done. But it also one more huge humiliation for Greece.

Until these EU demands are met then, Greece could yet default. This could cause market nervousness.

Coming Up

The following important economic releases are due later this week. There might hence be movement in the exchange rates at these times.

Mon 13th Feb 2012

US President Barack Obama press conference
21.45 NZ Food Price Index

In addition, to find out how this data has affected your foreign exchange transactions, feel free to get in touch. You can also call us on +44 (0) 1494 671800 or email enquiries@purefx.co.uk.

This entry was posted in Market Commentary and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

Follow us on Facebook
Follow us on Twitter