Have a pizza that Euro

26 February, 2013

Graham Harborne

Yesterday was one of the most volatile days in the currency markets we have seen for quite some time with a 2% swing in the GBP/EUR alone. The day started with the expected backlash following Moody’s downgrade of the UK’s credit rating late on Friday. After heavy losses during the Asian session as soon as the European markets opened the slide for GBP continued and this wasn’t helped by the weaker than expected mortgage figures. In fairness a downgrade had clearly been somewhat priced in but many experts were anticipating the slide to continue. Then came the Italians…

Rumours started circulating early afternoon that there could well be a ‘hung parliament’ in the Italian elections and early exit polls were backing this up. Indeed by the time that nearly all votes had been counted we were at a deadlock with no party securing a majority in the Senate and more concerning for the 3rd largest economy in the eurozone was that ¼ of the population failed to show up. This is likely to cause unrest throughout the financial markets with a temporary government likely to be formed before either a re-vote or a coalition is embarked upon. Italian yields are likely to be hit and we would expect the euro to suffer over the coming weeks.

So whether you won or loss with the huge swings yesterday markets are clearly going to be volatile in the coming weeks following these 2 recent events. Bernanke starts 2 days of testimonies and we have UK GDP out later in the week. To make sure you don’t get caught out by sudden market swings keep in touch with your account manager at Currency Index.