Euro Benefits As Germans Rule In Favour Of Bailout

13 September, 2012

Simon Eastman

The decision to go to court has been a leading factor in the pressure the Euro has been under in recent months which has seen trading on sterling/euro peak at 4 year highs. As the rumours began that a plan was in place, supported by Mario Draghi last week at the ECB meeting the Euro has been benefitting from stronger confidence from investors. The sign off from the German court was another step in the right direction and with nothing left in the way an EU bailout fund should materialise which will allow a free flow of help to assist with the struggling banks in Italy and Spain and any other Eurozone country which may require help in the future as the single currency area struggles to get out of its debt crisis, which in turn is weighing on a UK recovery.

As a result the Euro rode to fresh highs against the pound, making it even more expensive for those of you looking to move money to Europe. Whether it’s an apartment in Portugal, a villa in Spain or a farmhouse in France the recent dip in the rates has put thousands onto the cost of those Euros required to pay for your dream holiday. The swing is in the region of 3 percent, making a purchase of €250,000 some £6000 more expensive now than it was only a matter of weeks ago!! There is every possibility that with bailout provisions now moving in the right direction we could well see further Euro strengthening so if you have a transfer to make in the next few weeks you may be prudent to look at securing the rate on a “forward” basis sooner rather than later just in case the 3 percent difference becomes 4 or 5 percent!

Against the US dollar the pound reached levels not seen for about 4 months, helped in the morning by better than expected UK unemployment figures which showed a fall in those who have lost their jobs and claiming job seekers. In addition to the better UK data the court ruling also had a negative effect on the dollar as we have previously mentioned of late, a strong Euro, leads to a weaker dollar. Markets are fuelling the fire with bets against the greenback as traders sell on thoughts the FED may introduce further QE when their meeting ends later today.

As trade opens today the Euro will be moved by the ECB monthly report releases at 9am and a raft of Italian and Greek data following. The Bank of England quarterly bulletin follows at midday closely followed by US PPI and jobless claims, Canadian new homes starts and the all important US FED interest rate decision at 5.30pm. Later in the evening as US trade continues the FED press conference, economic projections, monthly budget report and finally a bond auction will all have an impact on where the Pound, Dollar and Euro open on Friday.