No relief from Greece as Eurozone crises moves into Spain

Publication date: 19 June 2012
Author: Mark Bolsom, Travelex

Relief following Sunday’s euro-supportive election results in Greece lasted just hours on Monday morning with investors quickly realising that Europe’s wider sovereign debt crisis had long moved on from Greece and into Spain. The euro plummeted by over 1.5% against the US dollar yesterday, retreating from near one-month highs after Spain’s government borrowing costs reached new record highs on mountains concerns that Madrid will soon be forced into a bailout.

Spanish worries fuelled more see-saw type trading activity yesterday with higher-yielding currencies, which had made early gains on the back of victory for Greece’s pro-austerity New Democracy party, soon found themselves in negative territory against their safe haven rivals.

The pound, surprisingly, was more or less unchanged with investors perhaps sidelined on sterling trades before today’s British inflation data that is expected to add to the UK’s monetary policy debate. Although the eurozone debt crisis continues to command most of the attention in global markets, investors will also take time out today to study German investor sentiment data. Analysts are expecting more evidence of Europe’s fiscal troubles suffocating the region’s leading economy.

Aside from monitoring indicators on Spanish government debt, markets will closely watch this afternoon’s US housing data in order to strengthen their views on whether or not the Federal Reserve will again turn to growth-boost quantitative easing tomorrow.