Greece
Greece’s debt was cut to junk status yesterday by Standard and Poors the credit rating agency, highlighting fears that Greece could default on its debt, and its stock market crashed 6%. It is widely perceived that a €30 billion package may not be enough to save Greece and that a default could occur even if it is approved. The development would probably explain why the pound picked up in afternoon trade after a poor early performance.
With the current package not finalised and pressure from Germany trying to keep out there is likely to be huge pressure on the euro in the coming days. After yesterday’s events there is likely to be decisive action soon which could see a turnaround for the euro.
Sterling Euro
The mood changed swiftly yesterday morning with the markets once again jittery on concerns over this likely hung parliament outcome. The pound slipped 0.5% against the euro but with the pick up later in the day rates are once again close to the peak we saw on Monday and remain attractive compared to where they have been over the last few months. For anyone that missed the boat yesterday it may be worth considering taking action now in light of these renewed political concerns.
From here on and until after the election sterling exchange rates are likely to remain ultra volatile. It would not be surprising to see a theme of large and unpredictable swings in the price of sterling as the markets try to guess the political outcome.
New Zealand Dollars
Tonight sees the Reserve bank of New Zealand interest rate decision. With rates on hold since June 2009 it seems unlikely that the Bank will raise tonight although the accompanying statement could give some clues on future direction. The general take is that there could be some possible improvements in the New Zealand economy and rates may need to rise in the coming months. This could mean further New Zealand dollar strength and new lows for the pound against this currency. New Zealand Business confidence figures released this morning are also likely to shape the markets.*
Clearly it is a big day for anyone with a New Zealand dollar requirement so it would be sensible to stay in contact with your account manager.
Data Today
This morning sees German Consumer Price Index data – With the good gains in the price of sterling against the euro over the last week coupled with the Greek situation expect volatility following this release. Consensus is for a very small rise in inflation which could hinder the euro this morning. Australian Consumer Price Index data was released in the early hours coming in at 2.9% and should drive the markets throughout the day.*
On the US side of things, this evening is important with the Federal Reserve interest rate decision – consensus being for a hold. A rise could see renewed dollar strength.
For anyone with a currency requirement please feel free to contact the author directly at jll@currencies.co.uk to look at the options available to try and maximise on the current rates of exchange.
