Greece secures it’s all important bailout

Greece secures it’s all important bailout

Good morning and welcome to today’s foreign exchange market commentary on Tuesday, the 21st of February.

Finally, the Greece saga has ended; bringing down curtains on an extended period of intense negotiations with more than its fair share of twists and turns that had put the global economy on the tenterhooks. A deal has been signed approving Athens €130 billion in bailout money that will help the country avoid a disorderly default on its maturing obligations. Private lenders have agreed to accept an unprecedented 53.5 percent ‘haircut’ on Greek debts while the country came perilously close to total chaos. The last word on future austerity measures have not been said yet, but the current scheme of thngs are expected to bring the dent-GDP ratio to a more ‘sustainable’ 120 percent from the current 160 percent by 2020.

To ensure that interest rates do not break Greece’s back again in the future, rates have been capped at 1.5 percent over Euribor. Don’t be surprised if the Irish Republic and Portugal demand similar sops to avoid Greece’s fate. In fact yield on Portuguese 10-year notes rose 53 bps to 12.8 percent following today’s announcement. Irish and Spanish rates have remained flat so far while Italy witnessed a nominal 1 bps rise.

Due today are UK’s public finance statistics. The Chancellor’s deficit reduction plans should come along nicely below the expected £127 billion target.

CURRENCY RATES OVERVIEW

GBP/EURO – 1.1965
GBP/US$ – 1.5858
GBP/CHF – 1.4444
GBP/CAN$ – 1.5754
GBP/AUS$ – 1.4794
GBP/ZAR – 12.1499
GBP/JPY – 126.585
GBP/HKD – 12.2972
GBP/NZD – 1.8940
GBP/SEK –  10.551

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 EUR: The single currency rose against the cable and the greenback initially on Monday with the EUR/USD pair touching 1.3277 and the GBP/EUR pair dipping to 1.1952. However, the initial momentum couldn’t be sustained and the euro consolidated around that level, waiting for the Greek outcome. The reaction to the settlement deal has been somewhat muted today. With no economic data expected from the EU region today, the single currency is expected to remain range-bound today. The GBP/EUR pair opens at 1.1949 this morning.

USD: The US celebrated the President’s day yesterday and it was a quiet day for the Greenback as most traders in the US decided to take a day’s off. The GBP/USD pair was influenced by the EUR/USD pair’s movement and moved to a high of 1.5880 before paring some of the gains to settle lower. The greenback is expected to remain range-bound today in the absence of any economic numbers. The GBP/USD pair opens at 1.5843 this morning.

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Have a great day!

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