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Pressure on Euro following IMF Comments
Breaking News this morning is that an Ernst & Young item Club’s report has predicted that the UK economy will rebound this year but as it uses the same model as the Treasury it still predicts that the UK economy will retract. However, it does confirm that it believes that the country will return to growth of 1.2% in 2014.
With Greece once again in the news recently IMF chief Christine Lagarde has said that ‘Athens needs more breathing space’ during this time as they continue their process of austerity measures. Germany is still insistent that Greece continues to meet its deadlines in order to keep its bailout funding even though it is becoming more difficult.
There are conflicting opinions about the Greek situation as many believe the policies are counterproductive and make it harder for countries to grow out of debt. This instability surrounding Europe has clear divided opinion and seen the Euro weaken during the end of last week. If this continues this could provide some very good buying opportunities for those needing to buy Euros.
According to recent figures published by the Office for National Statistics the UK construction sector contracted again in August which has caused the UK’s growth to slow recently. Compared to the previous twelve months activity was down by 11.6% and down 0.9% from July’s level.
New orders have now dropped to their lowest rates since 2008 at the height of the financial crisis. This is slightly worrying for the growth prospects of the UK and could have a negative impact on Sterling if this continues. With the IMF having recently downgraded a number of growth forecasts including the UK it could be argued that this news was already expected.
Spain has confirmed that a European bond-buying plan is ready to be used if and when required and there has been no political resistance. Recently Mariano Rajoy has suggested that Spain will do everything in its power to resist a bailout so is this a reversal and admission that Spain will take a bailout in the future? To me I think it’s only a matter of time as the country has unemployment at 25% 4 times higher than Germany and borrowing costs still above 6%.
So far the ECB’s bailout funding has only temporarily fixed the problem which has bought a bit of time but at some stage in the future Spain’s bailout will be inevitable. If you have a currency requirement to sell Euros you may wish to consider organizing this on a forward contract to protect yourself from the instability surrounding the single currency.
2012-10-15 14:37:57
Source: http://www.eurorateforecast.com/2012/10/15/pressure-on-euro-following-imf-comments/
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