German Debt Plans Boost Euro

A stabilisation of the euro has taken place overnight after bullish news from the EU leaders’ meeting as well as individually from Germany and Spain. The total EU meeting heralded an agreement for a permanent rescue apparatus for countries that hit insolvency by 2013. Germany, who were the most vociferous opponents, managed to get others to agree to a deal that would see bondholders take on losses but they put the kibosh on efforts to secure Euro-wide debt and other such left-field ideas.

Germany also helped out datawise as the latest PMI surveys available showed an improvement in business conditions while Spain chipped in after successfully auctioning over a EUR1bn worth of debt with a good take-up although the attached yield was slightly higher than had been expected; a result of investors’ continued fears over the state of the country’s economy and banking sector.

This morning Moody’s has made a head-smackingly obvious call and have downgraded Ireland on its “uncertain economic outlook”, which has taken some of the shine off the euro’s lustre.

The dollar was also in good voice yesterday with strong data in the Philadelphia Fed and initial jobless claims announcements. This was tempered however by fiscal fears after the US Congress finally voted through measures to extend the Bush-era tax cuts.

UK retail sales were as expected but the pound found solace in the latest Bank of England inflation expectations which told of an inflation picture expected close to 4%; their highest for over 2 years. Adam Posen, the dove to end all doves, said we should not be worried by the inflationary picture and continued the drumbeat for further QE.

German IFO is the only real piece of data today as we move into the last real trading day of the decade. I hope it’s been good for you.

Have a great weekend.

Indicative Rates	Sell	Buy
GBPEUR	1.1735	1.1764
GBPUSD	1.5712	1.5743
EURUSD	1.3295	1.3316
GBPJPY	131.11	131.37
GBPAUD	1.5796	1.5820
GBPNZD	2.1134	2.1164
GBPCAD	1.5713	1.5743
NZDUSD	0.7379	0.7400
GBPZAR	10.61	10.66
USDZAR	6.7907	6.8205
GBPPLN	4.6633	4.6910
EURJPY	111.57	111.82

Rates are dependent on amount transacted.

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