Contagion grips the euro

Currencies Direct April 27th 2010 - < 1 minute read

Greek bonds rose yesterday to a 12 year high as Germany and the IMF demanded a clear plan to how the country will reduce its overall deficit.

This plan would involve severe public spending cuts, tax hikes and the sale of state owned assets and will do nothing to improve the industrial unrest between the Greek government and its work force with further riots and strikes expected.

The yield itself rose to an expensive 13.7% and 9.7%, for two year and ten year bonds respectively and placed the Euro near a three month low against Sterling.The fear now is that despite the EUR45 billion package this will not prevent the deficit from spreading across other EU countries such as Portugal.

That sentiment was evident yesterday as Portuguese bonds rose to 5.3% from 4.28% a fortnight ago. The overall unrest has caused similar scenes to Greece with one in four rail workers striking during the Monday morning rush hour.

Back to the UK and with a fort night to go before the General Election and the hung parliament issue will not go away. The latest YouGov poll’s place the Tory’s in pole position on 34% who claim that they will reduce the UK’s overall debt quicker than both of its rivals. In other UK news, house prices rose for the ninth consecutive month by 0.2% in March and strong indication that the overall economy is moving in the correct direction.

In the US today we have a US consumer confidence figure out at 3pm BST. A significant figure that provides markets with consumer sentiment regarding business conditions, employment and personal income.

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