USD weakening to GBP/USD 1.6500
After yesterday’s relaxing bank holiday the UK’s financial markets are open for business again with news from foreign shores most likely driving developments – with no notably UK economic releases today. That said one story making the headlines here were comments by the FSA chief Hector Sants and the BOE’s Deputy Governor Paul Tucker about the future of UK financial regulation. They both raised concerns about increasing discussions within the European Commission about harmonising banking rules in areas such as capital and liquidity requirements.
This in part has been motivated by the continuing European debt crisis with Irish Taoiseach Edna Kennedy again forced to deny his country would require a second bailout. His comments came after Ireland’s transport minister said Ireland would probably be forced into another bailout before their existing facility expired in 2013. It is good to see a clear and coordinated message coming from the Irish government in these uncertain times!
It appears Angela Merkel’s German government are also giving mixed messages if comments in the Wall Street Journal prove accurate. It was reported that Ms Merkel is willing to use more German taxpayers’ money to provide Greece with new loans – despite insisting previously that Greece had to restructure its debt to reduce its payments, rather than receive additional funds. Whatever happens, it will have to be done quickly with the Greek government due to run out of money in mid July without further support.
In early morning trading Sterling remained at overnight lows against the Euro at 1.14550 despite a smaller than expected fall in German unemployment – a decrease of 8000 was announced with consensus expectations predicting a 30,000 fall. Strong comments made this morning by new ECB head Mario Draghi that he won’t be diverted from the primary goal of price stability – taking by the market that rates will continue rise to tackle the above target inflation level of 2.8%.
There was however a more positive note for those of you who are buyers of the dollar with GBP/USD reaching 1.6508. The USD was broadly weaker with EUR/USD through the 1.44 level for the first time in two weeks on the back of people selling their dollars on increasing risk appetite.