Euro In Limbo As Bunderstag Votes

Currencies Direct July 19th 2012 - < 1 minute read

The
Bunderstag is today expected to give the green light for Angela Merkel to push
ahead with the bail-out of the Spanish banks. German participation in the
bail-out is a must and the markets remain nervous about the potential for a
delay on the decision, ala the decision on the ESM by the German constitutional
court. However, it is likely that the vote will be passed as only a simple
majority, rather than an absolute majority.  The
Euro is finding some strength as we build up to the announcement, but its path
today is entirely down to the result of the vote. Eurozone data today is
confined to low level Italian industrial output.

UK
retail sales are also due later today. Modest gains are expected but the
effects of the extreme wet weather will undoubtedly have a real drag on the
numbers. The MoM figure is expected at 0.4%, but something closer to 0% would
not be a shock. Sterling remains in a Euro-Dollar sandwich and is unable to
find any traction on the back of UK related data or news flow. Public sector
finances figures are due tomorrow; the pressure is building on the Chancellor
as the economy continues to slow. The Prime Minister has reaffirmed the Government’s
commitment to fiscal austerity this morning, but it is becoming increasingly
clear that ultra-lose monetary policy by itself will not get us out of the mess
we are in.

The
Chinese authorities cut rates alongside the ECB and BOE earlier this month, so
tomorrow’s business sentiment number will be watched closely as the Chinese
economy slows.

 

Report
by Alistair Cotton

Written by
Currencies Direct

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