Following the news over the weekend that €100 billion was made available to Spain’s banks from the European Financial Stability Facility (EFSF) we saw an initial movement yesterday of Euro strength however by the end of the day the Euro had weakened against Sterling closing the day over 1.24 on the interbank level. It seems that the initial confidence the news the bailout brought was quickly eroded as it seems no-one is still quite sure exactly how much Spain and their banks actually need, in fact some are questioning whether €100 billion is enough considering in March following the Greek bailout over €60 billion was taken out of Spanish banks as concerns mounted over the health of their balance sheets. It is incredible to think that a figure of €100 billion may not be enough to save Spain’s banking system and the concern is that the country may have to go back to the EU cap in hand after they have used this first bailout so the question many people are asking is where will this end?! Following scenes of rioting and public unrest in Greece as the country went through severe austerity measures in order to receive a bailout the Spanish people are probably expecting similar so it is unlikely the news that their country is in need of at least €100 billion will go down well and we could see people trying to take their funds out of Spanish banks which could worsen the situation. Over the next day or so there will be an audit of Spains banks and the result of this will confirm the exact amount of funding needed so this could be an important week for both Spain and the Eurozone.
Following a raft of news relating to the UK property market the Royal Institute of Chartered Surveyors (RICS) has stated that the property market is stagnant with only 23% of houses on their books being sold in the last 3 months compared to 41% back in 2007. RICS stated that banks reluctance to approve mortgages is having a negative impact on property sales and the market in general and as we have discussed before on this currency blog a strong housing market will go to help the UK out of recession while a weak or stagnant market can keep pressure on the economy and therefore Sterling exchange rates. It seems the news from a range of different sources within the market are showing the market is not in a good way at present so it does not give us much hope for a swift recovery.
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