Diamonds are NOT forever

3 July, 2012

Graham Harborne

This morning has seen the resignation of Barclays Bank Chief Executive Bob Diamond following the debacle announced last week that Barclays had been fixing the Libor interest rate to suit themselves. It seems one step forward two steps back when it comes to the UK Banking sector but one bit of good news is that the reported £11 million he was due to receive in payouts this year will now be left in the banking sector… so some other fool can play with that now!

After last week’s Euro Summit the initial reaction to the markets in general was positive and we saw the euro recover some of the losses we had seen earlier in the month against both the pound and dollar. Having said that, as seems to be the case time and time again when the dust has settled the underlying factor remains that the 12 bloc currency’s existence hangs very much in the balance and selling pressure again rose yesterday as more details of what the summit achieved were released and it’s clear that although everybody is keen for a resolution soon not all nations are singing from the same hymn sheet.

Despite poor UK PMI data the pound gained against both the euro and dollar as eurozone fears again were the main market movers but the poor data did further increase the expectation that the BoE will increase quantitative easing when the MPC meets on Thursday this week. Though this has been priced into the market we are still likely to see some sterling weakness as the week progresses. Yesterday we saw the typical English summer weather wiping out most of the day’s play at Wimbledon and those of you needing to sell pounds for a foreign currency should note that typically an increase in quantitative easing this week will wipe out all gains that sterling has made over the last few weeks so it would be well worth contacting your currency broker here at Currency Index to ensure you’re not caught ‘out’.