F/X weekly comment

Early start for this weeks missive. Very busy weekend ahead on Spectrum business, so I'm writing this on Friday morning. So if something happened on Friday afternoon to make me look even dafter than usual, I apologise (again). As I write we are looking at 1.1510 (the first time I typed that it said 1.51... maybe one day), which is somewhat out of line from my forecast of 1.1375. but I don't mind too much when it's that way round. So what's been going on this week?

Sterling down against the Euro early in the week

The pound struggled during the early part of the week as the Euro was supported by news that European leaders are chasing round the continent to discuss the release of more aid for Greece. This strengthened the Euro, and along with continued speculation that there will be more QE (printing money), the pound was floundering in the low to mid 1.14's.


Bailout Fund

With this wonderful system of consensus that is Europe, the merry-go-round of votes on all things important has been going on during the week as to whether or not European taxpayers will be saddled with the burden of chucking more and more money at the political football that is the Euro project. The problem is that it is a bit like turkey farmers voting for Christmas. It is very much in their own interests to keep this ship afloat, and the taxpayers supply the money.

Finland having approved the enlargement of the bailout fund on Wednesday, it was the turn of German Chancellor Angela Merkel to face a vote on whether to play ball today. Luckily for her, there are enough turkey farmers in her coalition. Chancellor Merkel puts it another way, she says she believes the vote is about Germany demonstrating its determination to save the euro. Of course it is.

Greece

Is a busted flush. Even the prime minister says he can't afford to pay the new taxes that are appearing by the day. They will default, however cleverly it is dressed up. That will weaken the Euro in the long run.

What next?

Barring economic turmoil on Friday afternoon, the Euro will probably end up around 1.1475 or 1.1500 against the pound. What happens next is anybody's guess, but mine is that Greece will stay in the news, and we may see the pound hang on above 1.1550 by next Friday, when I will (hopefully) report on a full week of shenanigans.