Riots In Eurozone Cause Distress

Economic turmoil in the Eurozone has begun to turn violent this week, with anti-austerity protests in both Greece and Spain, with police targeting protestors in Madrid and Athens with rubber bullets and tear gas in an effort to disperse them. With the Spanish government looking to announce further austerity measures later today, these protests are likely to continue. Analysts are predicting that the measures put in place are likely to be especially harsh, considering the Bank Of Spain’s announcement that the Spanish economy had continued to shrink at a “significant rate” in the third quarter of the year, and the region of Andalucia alone is reportedly considering asking for a 4.9bn euro bailout. These concerns have caused significant problems not just for the Euro, but are starting to affect the British economy as well, with banking stocks across the European Union falling sharply on the announcement. The value of both the Euro and sterling fell against the dollar yesterday, as investors start to look away from the troubles in Europe for the time being. The Euro itself fell to a two-week low against the dollar, with sterling rates falling 0.1%, retreating from a 13-month high that we saw last week.

The important news to watch out for today is the UK GDP announcement at 9:30am, with analysts not expecting any revision to the previous GDP reading for the second quarter, which indicated a 0.5% quarter-on-quarter decline. However, we all know just how unpredictable the markets can be, and any other announcement, positive or negative, can swing the sterling exchange rate in a variety of directions. If growth is seen (or, indeed, less decline than expected), we can expect the rates for sterling to gain ground against both the venerable euro, and the dollar.

The dollar itself is performing relatively strongly at the moment, picking up ground from the weakness caused by the announcement of stimulus a few weeks ago. However, some reports say that profit warning from major transport firms could be an early sign of upcoming weakness for the American economy.

The UK GDP figures are likely to cause some change in the markets today, no matter which way they go. If you’re looking to make any currency transfers in the near future, please contact your account manager at Currency Index, to see how we can assist with any future upsets in the market by getting you the best exchange rates available.