Greek bailout makes for volatile day in currency markets

Published: 22 February, 2012

The €130 billion Greek bailout deal resulted in a fairly volatile day with sterling finishing the day weaker against the euro.

Currency rates - February 22

EURO/GBP - 1.1914
US$/GBP - 1.57708
CHF/GBP - 1.4387
CAN$/GBP - 1.5721
AUS$/GBP - 1.4795
ZAR/GBP - 12.1883
JPY/GBP - 126.431
HKD/GBP - 12.2298
NZD/GBP - 1.8930
SEK/GBP - 10.481
AED/GBP - 5.7923
US$/EURO - 1.3231
INR/GBP - 77.62

The UK's public sector net borrowing figures came in better than the markets had anticipated showing the biggest budget surplus in four years. The surplus was a result of higher than expected tax receipts in January and the suggestion is that the UK will beat its own targets to cut the national deficit.

Following the announcement that the Euro zone had agreed the second Greek bail out there was knee jerk reaction in favour of the euro; however, the trend lost momentum throughout the day. Some important points from the deal include the requirement for Greece to reduce its debt to 120.5% of GDP by 2020 from over 164% where it currently stands. Private sector investors were also expected to occur loses of 53.5% on the Greek bonds they held. Moreover, the three year loan package of €130 billion is dependent on the conditions set out being met on an on-going basis otherwise later tranches will be withheld. This saga is far from over.

There was very little data out in the US yesterday; but, US equities were buoyed by the announcement that Greece had signed its second bailout package. The main release today is the existing home sales which is expected to show a slight increase in the number of residential buildings that were sold during the previous month.

Elsewhere, the Australian dollar fell shortly after the central bank released its minutes which included the suggestion that the bank would still consider cutting interest rates if demand conditions weakened. Switzerland's trade balance figures were announced yesterday which were worse than expected. Moreover, Canada's retail sales were also lower than anticipated. The main release today is the Purchasing Managers Index (PMI) data from China released first thing in the morning. Call in now for the latest update and the latest news.

Supplied by Nick Ryder of Smart Currency Exchange, the currency partner to Harpers Wine and Spirit who have teamed up with Smart to provide readers with a free bespoke currency service. Go to www.smartcurrencybusiness.com/winespirit for more information or call on 0207 898 0500.

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