I look at it from the point of view of economics with no idea how finance functions and it is actually incredibly interesting because it is defying so much economic theory that it means that new thought will be required whatever the outcome. In that sense it is brilliant, perhaps not if you are a punter in the middle though.
It really is. It's a very interesting market at the moment with surprises every day, and sterling has strengthened again this morning.
Are you working with a currency specialist, Liz? I'd be delighted to help you if you want to send me an email at will.hewitson@torfx.com
We can watch the rates for you and also offer services like forward contracts or limit orders. Let me know if you have any questions.
Its an anxious time for those of us looking to buy property in France, watching currency changes with interest!
Sterling posted a fresh seven year high against the Euro yesterday, but then lost out by around 200 pips before the close of trade.
Euro is showing huge resilience when we consider what we were anticipating to find when we came in first thing Monday morning. Hopes that Greece will vote YES in the upcoming referendum (and effectively keep the nation in the currency bloc) supported the Euro yesterday, whilst Sterling came under pressure following some dovish interest rate hike comments from the BoE. The Chief Economist at the Bank of England asserted that interest rates in the UK are as likely to be cut as hiked, so the pound softened as a result. Despite a sturdy increase in UK consumer confidence, the pound continued trending lower, even falling below 1.40 briefly overnight.
Depending on who you speak to, it could still go either way. It is certainly a busy and exciting time to be sat in the middle of a trading floor.
Exchange rates have bounced about today. £ was €1.44 at one stage, back down to €1.40 now. CHF was all over the place, US$ erratic and both ¥ went high now back down. Fast moving but uncertain day.
A guy I know at France 24 posted this on FB this morning https://www.youtube.com/watch?v=6bbIBs0P2t0 with the comment, "ANY of our reports concerning Greece for roughly the next week.".
Caused me a chuckle. :)
On that I agree, however I do not expect a coward to come out from under his stone without a lot of other people on his side.
Brian, I would actually describe IDS and his cohorts as Europhobes, not a Eurosceptics.
One can only hope he will come out from under his Ministerial cover and stand up for what he believes in. Then perhaps we will have someone who actually believes in the rule of law.
Thomas Jordan, head of the Swiss National Bank, revealed this morning that the SNB has already intervened to protect Switzerland being hit by the Greek crisis. The Euro plunged against ChF early today but bounced back as the SNB revealed it had intervened. That probably means that they are throwing money at Greece and that they know there is more coming from somewhere, probably the USA. SNB is far too aware that a Euro collapse would break the back of the ChF too which would have a worldwide knock on effect and could precipitate a massive crisis that would make 2009 look like the teddy bears' picnic. It is all moving very fast.
The world is a bit strange. With quantitative easing, countries produce money more or less out of thin air. In fact a country can become bankrupt, declare itself broke, cancel all debts to the nation then start all over again from scratch but still have the money owing to it to call in or use as collateral without being paid off. In short, lots of money does not actually exist other than on paper (in a computer memory actually). So, what is happening is being highly dramaticised by politicians and journalists who prefer to ignore or not understand QE and the real world economy. It is a bit anorakish but I really love economics, almost because it is far removed from the days of John Maynard Keynes, Joseph Schumpeter, Friedrich von Hayek, Paul Samuelson, Milton Friedman or Karl Marx and all such famous names I was indulged of as a student. Even Francis Fukuyama and Alan Greenspan are starting to look out of touch at present.
Europe is here to stay as a body, it may prompt some of the necessary reforms that have been delayed too long and no that will not be a fanfare for Cameron's demand, if anything probably quite the opposite. Now we need to hang on to our seats because this is feeding into the hands of UK Eurosceptics.
In 2005 the euro was much lower against sterling, Greece has to put it’s house in order, if they exit they still owe the money…they cannot continue as they were, so must change in or out. The Euro may go down a bit but will recover and if the UK exits Europe, in the long run, the UK will lose out…our money will stay here, where our future is
Oh yes, just to 'inspire' (not) the news on UK banks is that HSBC, which was in the world’s top 10, has fallen from fifth to ninth position, according to an annual ranking of the world’s top 1,000 banks. Barclays slipped down from 12th to 13th place, RBS 15th to 18th only Lloyds remained as it was and Nationwide climbed up from 119 to 105. The rest moved down a position or two. Collectively UK banks are performing at only a third of their peak performance in 2007. That may not seem bad, but in terms of economy rather than actual banking it means overall performance is weak and that a lot of money is being wiped out.
The overnight news was not good: US stock futures dived 1.8%, Japan’s Nikkei stock average briefly fell by more than 500 points in early trading, while the euro dropped more than 3% to 133.80 yen and $35bn was wiped off the Australian stock market. The Chinese central bank began monetary easing on Saturday as investors were seen moving to 'safer' assets with the threat of an unprecedented debt default in Europe. Speculative selling of debts of such countries as Italy, Spain and Portugal will probably be countered by the European Central Bank that started to buy Eurozone sovereign debts from national markets back in March.
In the case of a Greek default, global stock markets are likely to fall 1% to 2% which is a fairly big wipe off of investment worldwide. The City would be hit very badly. So Sterling would be destabilised.
This morning Greeks will find their savings blocked and banks closed for a week following a weekend that has shaken world financial markets. The Athens Stock Exchange will not open either. It looks like banks will also switch off their cash machines so that the only way Greeks will be able to get rid of cash will be by crossing into other countries. Banks may simply block accounts though. Given the run on Euro withdrawals, if Greece decides to leave the Euro they have a very much depleted cash economy, trading Euros for other currencies will be at enormous loss for people, indeed the country as a whole. If they now default, the debts do not go away leaving Greece more or less bankrupt with no actual basis for reintroducing its own currency without printing 'funny money' that will devalue in a way comparable with the German hyperinflation of 1922–23, when there were 90 Marks per US Dollar during the first half of 1921 but 330 Marks per US Dollar by the end of the year, then it got going; 800 Marks per Dollar by the end of 1922 and 4,210,500,000,000 German Marks to the US$ by the end of 1923. It is unlikely to do that this time but if it all goes wrong this week the inflation in Greece will destroy their entire economic base almost irreparably.
Now to see who throws the lifeline? However, the ECB seems to have anticipated this by buying sovereign debts, thus will be able to hold the Eurozone steady. The question is as much how much have speculators in the City thrown at Greece and the knock on effect on extensive Euro investment.
I have been watch the Economist and Wall Street Journal sites since about 0500 this morning and it is not as bad as it might have been which leads me to believe that something is going to happen to shore Greece up. Frankfurt is uncertain and Zurich is moving fast, but then ChF will be hit hard by a collapse, the knock on of which would hurt US$, £ and both Chinese and Japanese ¥ - all have put their piggy banks there long, long ago.
So, we shall see.
Why should the Euro devalue? To outside economies the Eurozone without Greece will appear stronger that with it.
Well, the Euro value decrease has in a large part been from a deliberate action to make that happen by the ECB anyway. They said several months ago they were taking steps to decrease the value in order to make EU exports more appealing.
I doubt we'll be seeing any kind of massive crash, the euro will just continue decreasing steadily in value.
If, it is still very unlikely, the Euro unravels then stay well clear of any European banks, including Sterling in the UK. The problem is how to get accounts in another country without residency. I have just had to close my Swiss post office account because the new charges are higher than reasonable, €15 a transaction outside of CH and the same as the basic monthly charge. That is for ChF and € account holders not resident. Other countries are doing similar things.
Anyway, Obama has just stuck his oar in the Greek business and trying to get them to stay in, which will mean Federal support. They need a stable EU for the TTIP which the USA has given the green light to last week and now depends on the the European Parliament to get a majority vote, which is almost certain, then by the end of this year we are all fried anyway. So, I suspect Washington will be providing the Euro sticking plaster this week and an eleventh hour solution will magically save the day.