Festive cheer – ECB offers a nice present to banks

Banks jumped at the chance of “Free Money” yesterday as the European Central Bank flooded the markets with low interest 3 year loans. A total of 523 banks borrowed EUR489.2bn in the ECB’s biggest ever funding exercise. The total surged over EUR100bn above the expectations as regulators encouraged lenders to take advantage of the cheap money on offer. The upswing in demand for funding comes as Europe descends into another credit crunch where banks have been refusing to lend to each other for fear that the borrowing bank could be insolvent. This comes as many banks have continued to write down the value of the sovereigns bonds they hold. Italian banks are believed to be the biggest borrowers as data came out revealing their economy shrinking by 0.2% over the 3^rd quarter of this year.

Apart from this, there has been very little out in the way of news or data. With the year coming to a close, volatility on the markets has slowed and we’re expecting stable trading over the holidays. Euros fallen 5% over the last month looks set to go into 2012 on the back foot with the US Dollar remaining strong as the global favourite “Safe Haven”. Sterling has been in limbo over the past few weeks as it has strengthened against the weak currencies while losing ground to the strong ones.

Thanks for reading these reports over the year and from the team, we wish you a Merry Christmas and a Happy New Year.