Italy in Bond talk with China

Tom Tong13/Sep/2011Currency Updates

GBP

Sterling drops to its lowest against the Greenback since January as ever growing speculation continues over the increasing sovereign debt crisis and fears Greece may default. As the pound begins to show signs of its potential to outperform the euro, Sterling remains under pressure verse the Greenback and other currencies as the talk of quantitative easing speculation continues around the BoE’s next steps.

It appears the BoE are likely to announce the purchases of further UK assets from market and with the government pushing banks to ring-fence investment and retail banking as there is not only a cloud looming over the economy and Europe, but the financial and physical aftermath of a hurricane from the west.

The main focus for this week will be on UK jobless data and retail sales figures to determine what direction Sterling will next take. However, with today’s inflation figures expecting prices to continue at a high, the outlook continues to cast a shadow over the UK’s progression and the winds from the west show no signs of slowing.

USD

With the big news happening in Europe the dollar strengthened against sterling and the Euro on the back of the news that China may step in to buy Italian bonds. With fears about the the euro zone crisis continuing to grip global markets the dollar remains to be backed as a safe haven commodity.

U.S. Treasury Secretary Timothy Geithner is heading to Poland this week for an unprecedented meeting with euro zone finance ministers as growing fears of a potential Greek debt default continue to put serious pressure on Europe’s banking sector.

US data out today includes the Import Price Index and the monthly budget statement.

EUR

The euro fell to a seven-month low against the dollar yesterday on fears of a possible debt default by Greece. Traders believe that Greece is increasingly likely to default. The heavily indebted country is struggling to convince others that it has its debt under control. Some are reluctant to release another chunk of emergency aid because Greece is having a difficult time meeting the deficit-cutting requirements of its bailout package.

The euro also fell toward its lowest level since 2001 against the yen, again on speculation Greece is nearing default and also before Italy sells bonds today amid concern the region’s debt crisis is worsening. The 17-nation euro snapped yesterday’s gain against the Greenback as traders wagered the European Central Bank will cut its benchmark interest rate over the next year, according to a Credit Suisse Group AG index.

Italian officials have held talks with their Chinese counterparts about potential investments in the euro region’s third-largest economy, an Italian government official said. The purchase of Italian bonds by China was not the focus of the talks, which took place in the past few weeks, the official said on condition of anonymity, without specifying which assets may be involved.

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Written by Tom Tong

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