Eurozone agrees new bailout package for Greece
Friday 22nd of July 2011
EU leaders have
announced a second bailout package for Greece, this time involving private as
well as government investors. This could in time be seen as a partial default
by Greece, when the credit agencies such as Moodys and Standard & Poors next
produce ratings, but for now the perception is that the outcome is as good as
it could have been - leading to some strength for the Euro.
Sterling has done reasonably well out of the crisis against other currencies,
with US Dollar rates showing their biggest weekly increase since May. Rates for
sending payments in US Dollars are now near their best levels for 6 weeks.
With very little data due out on Monday, markets might now settle down, with
two main points to consider for the short term:
- Will the Euro strengthen further if the Greek bailout package is seen as positive by the rating agencies?
- Will the Pound weaken if the phone hacking scandal continues to reduce confidence in the stability of the Uk government?
With these in mind it is worth remembering that you can fix exchange rates in advance, to eliminate the risk of falling exchange rates, using a small deposit. Contact a foreign currency broker to discuss your options, and make sure you keep updated with the latest currency news.
The Greek deal has certainly bought some time for the likes of Italy and Spain, who risk getting dragged under pressure from bond markets. Time will tell how markets react, but history has taught us so far that Eurozone coherence in protecting the solvency of troubled nations tends to lead to Euro strength and lower exchange rates.
As always, the Uk is heavily exposed to many European banks, particularly in Spain, so even if there are troubled times ahead for the single currency, we will not necessarily see a weakening Euro against the Pound. For any real improvement in exchange rates, we really need the Bank of England to start talking about Uk interest rate rises, which they indicated in their minutes this week is not even nearing the bottom of their monetary agenda at present.
