Negative News for the Euro
The meeting of G20 finance ministers and the IMF over the weekend has failed to calm market nerves over the Euro zone debt crisis. Euro zone nations talked of increasing the €440bn rescue fund with a figure of €2 trillion being suggested. However, there was no evidence of how this would be achieved at a time when national governments are facing revolt to such actions. French President Nicolas Sarkozy, became the latest leader to have been dealt a political blow when he lost his majority in the Senate over the weekend.
Meanwhile, US treasury secretary Timothy Geithner and the IMF have placed pressure on the ECB to continue with its bond buying operations even once the responsibility passes to the European Financial Stability Fund. An IMF spokesman stated that the ECB was now the only player in town with the ability to scare market speculators off. However, ECB executive board member Jurgen Stark put a stop to such speculation stating that “for monetary policy to remain effective, its responsibilities must remain within clear limits”.
This morning has also seen rumours increasing that Greece will be involved in an orderly default where private bond holders will agree to take a hair cut on their debt. The biggest concern over such a policy is that this would create further selling pressures on other bond markets within the Euro zone.
On a more positive note monetary policy within the single currency may be eased as soon as the October 6th meeting of the ECB. As Euro zone inflation is now expected to drop comfortably below the EC’s target according to ECB policy maker Patrick Honohain. Other positive news is that Ireland believes that it should be able to return to the debt markets as soon as 2013. So, the above development all point towards another week of Euro weakness against both Sterling and the Dollar.
What does this all mean for me? Well buying your EUR, USD, AUD or any other currency at the wrong time could cost you a fortune. There is no crystal ball but Currency UK can give you the information you need to make an informed decision.