Focus of concern continues to shift

14 December, 2012

Matthew Boyle

Yesterday saw a significant announcement from Europe with news of new ECB supervision rules. 200 banks within the Eurozone are now to be supervised and monitored by the ECB in a bid to increase stability and avoid any future banking failures as have been seen particularly in Greece and Spain this year which initially triggered the financial crisis. Despite news of a further 49.1 Billion Euro bailout for Greece, this news was welcomed by the markets and saw the Euro strengthen back against the pound following earlier losses in the week. Hailed by ECB President Draghi this is an “important step”, and albeit a long way to go could mark the start of Eurozone financial recovery.

Elsewhere the much anticipated Fed meeting in the US saw no major changes as it was announced interest rates will be held close to zero until unemployment figures have improved- something which was previously announced and expected – and as such the dollar held relatively stable against Sterling. However following the positive ECB banking announcement amidst fears of further US economic weakening the dollar continued to lose ground against the single currency.

What is perhaps more concerning for American recovery is the current bond selling programme, “Operation Twist”. This is due to finish at the end of the year and has in recent months been a major form of financial stimulus helping to ease US economic woes . Once this programme ends the ominous “Fiscal cliff” which has been the centre of much debate could be upon America if a fast agreement over tax increases and spending cuts cannot be reached.

Market concerns are indeed continuing to move away from Europe and towards the U.S – something which may be further compounded as today sees both release consumer price index reports. It will certainly be an interesting comparison to make, and a more positive result for Europe that the U.S will only add to concerns as the focus continues to tip towards the US.

Make sure you speak to your Currency Index broker if you have any transfers coming up to stay one step ahead of the markets.