Euro weakens on Cypriot bailout problems

The Euro has unexpectedly weakened over the weekend, as markets react to the EU bailout of Cyprus, which proposes a levy of up to 9.9% on all Cypriot bank deposits. EU leaders have proposed the levy, particularly as so much Russian capital is held in Cyprus, as part of the €10bn bailout package designed to shore up the Cypriot financial system.

The Euro has reacted by dropping in value by over a cent, giving the best rate for buying Euros in over a month.

With the UK budget due from George Osborne on Wednesday, and the Bank of England minutes released the same day, we could be seeing a limited opportunity to buy Euros at better exchange rates over the next 48 hours. Tomorrow also sees UK inflation figures and with unemployment also out on Wednesday, there is certainly potential for the Pound to fall back later in the week.

Sterling has also picked up against the US Dollar, South African Rand, and Canadian Dollar.

The Cypriot situation will be in the news throughout today and tomorrow, with the bailout terms potentially being renegotiated, and the Cypriot government needing opposition support to ratify the terms. The President, Nicos Anastasiades, has warned that Cyprus must choose between stabilising its finances, or potentially face the collapse of its banking system and an exit from the Eurozone, in echoes of the Greek crisis last year. The UK has said that British expats with Cypriot accounts will be compensated for any levy applied, but with mass withdrawals from banks starting to cause further problems, the next 2 days are crucial for Cyprus and Eurozone sentiment overall. Do call us at Currency Index if you are affected or if you have an upcoming Euro requirement.