Cyprus bailout deal leaves markets unconvinced

Currencies Direct March 27th 2013 - 2 minute read

The Cyprus crisis continues even
though the bailout has been agreed. In a measure that was reached,
they have come to a conclusion that all deposits of over  €
100,000 will be hit by losses of over 40 percent as those under the
mark will remain safe. This has spooked markets moving them into
negative territory throughout the region with almost every European
Index plunging, as Cyprus heads into its 12th straight day of bank
holidays, amidst concerns that most people will try and move out
their funds in large numbers and would prefer to hold cash. The
negative sentiment is also enhanced by rumours that this format
will be adopted as a template for any further bailout schemes.
Although top officials deny any such move in the future, markets
are still wary that this format will leave the banks with fewer
deposits and in turn will allow them to lend less, shrinking
growth. The Euro as a currency has taken a hit and trades this
morning at a rate of 1.2825 against the Greenback. Meanwhile, there
are also reports from Spain, that economic climate in the country
will further deteriorate this year and shrink by 1.5 per cent.

Over to the US, where there was a
glimmer of good news for US equities after figures showed orders
for US durable goods rose by 5.7% in February whilst housing data
also demonstrated a steady rise in prices. Markets are fairly
positive that the world’s largest economy is finally starting to
experience some steady growth following years of stagnation. As per
February’s slump in consumer confidence, most people are still
concerned on the Budget talks that continue in Washington. However,
the US dollar has managed to maintain strength as investors look to
it as a safe haven with the on-going turmoil in the Eurozone. The
positive US data releases, has done little to cheer up Sterling, as
the currency was unable to cash in. Retail sales in the UK for
March were flat compared with a year ago as per the Confederation
of British Industry, and the GBP/USD pair traded between a range of
1.5134 – 1.5206.

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Currencies Direct

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