IFX Market Report for 27/06/2012

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    Public Sector Net Borrowing figures released yesterday showed UK public finances increased from -£19.93bn in April to £15.48 bn in May. These figures are looking less healthier than a year ago, rising from £12.326 bn in May 2011.GBPEUR started the day at the low of 1.2469 but quickly moved above the psychological level managing to hit a high of 1.2523 in late afternoon trading.

    GBPUSD also started positively at 1.5610 before moving to 1.5641 on the back of Treasury select committee quotes being released.

    In evidence to the Treasury Select Committee, Bank of England Governor Mervin King said the impact of any interest rate cut would be marginal compared to the amount of QE the MPC can do and the committee could expand QE without any immediate limit or constraint. King also said the MPC had nothing in principle against a cut in interest rates but was not persuaded on the case for it now.

    GBPAUD traded range bound for the day starting at 1.5531 before hitting a high of 1.5569 and closing at 1.5538.


    EURUSD opened at 1.2517 and lost value throughout the day, falling below the psychological barrier of 1.25, hitting a two week low of 1.2440.

    The Spanish two-year note yield added 37 basis points to 5.22% as the cost of insuring the nation’s government debt rose for a second day, Spain sold 3.08 billion euros ($3.85 billion) of bills, with the three-month note yielding 2.362%, compared with 0.846% at the previous auction.

    CB Consumer Confidence in the US continued to drop for the 3rd month, coming out worse than forecast at 62.0 against Forecasts of 63.8
    Spain’s banking sector came under further pressure after ratings agency Moody’s downgraded the debt of 28 Spanish lenders on the same day Madrid formally asked for aid for its financial sector. Moody’s said the action followed the weakening of the Spanish government’s own creditworthiness, in relation to its downgrade of government bonds to Baa3 from A3 on the 13th June.

    Spanish Economy Minister, Luis de Guindos has said that negotiating terms for a European financial package to recapitalise its banks was a very complex process and would take time, playing down hopes of a quick rescue for the country’s ailing lenders.

    European authorities have unveiled their vision for the future which includes the creation of a European treasury which would have powers over national budget. German Finance Minister Wolfgang Schaeuble also called for there to be a European finance minister, with the power to veto national budgets as well as an elected president of Europe.

    The Greeks have named Yannis Stournaras as their new finance minister after Vassilios Rapanos resigned on Monday citing poor health.

    Japanese Prime Minister Yoshihiko Noda’s took a big step towards winning a sales tax increase aimed at reining in the nation’s public debt yesterday approving legislation to double the 5% levy by October 2015, 57 lawmakers in the ruling Democratic Party of Japan voted against it which may endanger the party’s majority in the 480 seat chamber.

    Daniel Fountain / 26.06.2012

    Editor, Hotel Designs


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