Pound Makes Resurgence Despite Spanish Bailout

After initial gains by the Euro following news the Spanish bailout had been agreed, the Pound was able to gain mainly due to investors fears that this weekend’s Greek election is likely to lead to a non-austerity government in Greece, which in turn is likely to lead to an exit from the Euro. If this does happen then it is likely to make Eurozone wide bailout funds harder to come by, as the whole zone corrects the loss of one of its members. Spain and Italy beware – your bailouts might be agreed, but if the funds aren’t there, they won’t be forthcoming.

What this means for your Euro currency purchase is hard to tell. Short term GBPEUR will at best be very volatile as the markets react in the coming days to the lead up and then result of the Greek election, with the very likely possibility of protracted coalition forming negotiations, making things even more uncertain and long winded. Longer term if the Greeks do end up leaving the Euro, will this mean Euro weakness over fears of a break up or Euro strength as this very heavy millstone is removed from the equation?

The answer is no one knows, we are in unprecedented times at the moment, and as such the age old mantra of take what you can get is probably the best way forward. Rates are only just off 3.5 year highs, so if you need Euros it is quite possibly best to get them bought, before the uncertainty and hence volatility kicks in.

This morning we have UK industrial and manufacturing data out at 9.30am. This has not done the Pound any favours for the last couple of months, so the early bird will quite possibly catch the worm…