Markets Look For Roadmap From Summit
Currencies Direct June 28th 2012 - < 1 minute read
Hopes are fading that the EU leader’s summit
this weekend will produce anything concrete for the market to digest on Monday
morning. The current impasse between EU politicians is stemming from the order
in which the EU moves towards political, fiscal and banking union (or not as
the case may be). The Germans are unwilling to consider a banking union without
direct control of how bail-out money is used by those banks in Spain, Italy or
France that would require money. That is, Germany would want political union
before it committed to using the ESM/EFSF
to recapitalise Euro-zone banks, which is the least likely of the three steps
needed to be achieved on any reasonable timescale.
The southern states naturally feel the exact
opposite is the way to go. What we need at the very least is a roadmap of how
we eventually get there. But there is a real chance we may not even get that.
Spanish Bond yields continue to creep higher, this morning the 10y is trading
fractionally below the 7% level, sitting at 6.99%. Nothing more is needed other
than ‘unsustainable’ to describe Spanish borrowing costs at the moment, making
the decisions made this weekend all the more important.
The final UK GDP number is today released for
Q1 with no changes to the -0.1% expected, as is the same number in the US this
afternoon. German jobless figures released a short while ago showed a slight
decline from May, but the Euro remains under pressure in the build-up the
summit. Tomorrow personal consumption data from America is due along with the University
of Michigan confidence survey.
Report by Alistair Cotton