It may have been a bank holiday in the UK, and in Japan, but elsewhere in the world workers and traders were back at their desks yesterday. Some people didn’t even take the weekend off, including EU officials who once again used the weekend to arrange and announce the latest iteration of the Greek bailout measures. The new measures dwarf the previous arrangement coming in at €110bn, although they do come with €30bn worth of austerity measures attached. It’s been along wait for a worthwhile package to be agreed so you might expect the market to react favourably to the news, but instead the reaction has been muted at best. Their are some barriers to implementation, the agreement will have to be ratified by the donor countries parliaments, and it is by no means certain that Greece will be able to implement the measures as even with their current spending cuts, the people have been taking to the streets, and a series of strikes have been arranged over the next few days.
The Euro has failed to gain much traction from the announced plan, and the Pound has managed to keep above 1.15 throughout the weekend. Sterling hasn’t performed so well against the Dollar slipping back below 1.52 this morning as the failure of the bailout plan for Greece to calm the markets has caused a bit of risk aversion. The Dollar has also gained some strength from some good economic reports as manufacturing growth rose at it’s fastest pace for 6 years, there was a bit of panic as it looks like Goldman Sachs might be prosecuted for their sharp practices, although some calm was brought to the markets as the major US bank was given some support by Warren Buffett. The stronger Dollar has managed to keep the weaker Euro to around 1.3150 in trading this morning.
We’ve had some mixed data out today with weak mortgage lending in the UK, but strong manufacturing growth. UK manufacturing is much maligned, but we are still well in the top ten largest manufacturing nations, and today’s figures, which show the fastest pace of growth for 15 years, have managed to overshadow the weaker mortgage figures, although they haven’t given the Pound much support. Sterling has stayed buoyant against the Euro, and is likely to continue to do so especially if the Conservatives keep stretching their lead in the polls in the run up to Thursday, and the prospects of the Greek bailout continue to be uncertain.