Friday the 13th – unlucky for some

13 July, 2012

Tom Arnold

Today is Friday the 13th and already it appears to be very unlucky for the Eurozone. Overnight the credit rating agency Moody’s downgraded Italy’s status to only 2 points above junk status. With today’s €5.25bn auction of medium and long term bonds due this is the last thing Italy needed and expectations are for the yield on 10 year bonds to move up to 6% – perilously close to the 7% level, which is considered to be where the cost of borrowing has become unsustainable. One analyst said “Italy’s near-term economic outlook has deteriorated, as manifest in both weaker growth and higher unemployment, which creates risk of failure to meet fiscal consolidation targets”.

Today is a very quiet day on the markets data-wise, with only CPI inflation data from Spain and Italy due this morning, and obviously the above mentioned bond auction. The Euro has been at 4 year lows against the Pound and also 2 year lows against the Dollar. With the Italian situation seemingly likely to put only more pressure on the Euro, those of you looking to sell Euros might be well advised to contact their Currency Index account manager to discuss your options and maybe consider a forward contract.

The Tour de France is currently winding its way through the French countryside and mountain regions, and not unlike the Eurozone crisis the Europeans are feeling the pressure of unprecidented occurances. For the first time ever we have a British leader and a Briton in second place, with the highest placed European being the Italian Vincenzo Nibali in third place. While today is unlikely to give the Italians anything to smile about economically, at least they can take some solice from Vincenzo’s performances so far, even if he is struggling to keep up with Wiggins and co…