Eurozone finance ministers make progress on bailout agreement for Spanish banks

Tom Tong10/Jul/2012Currency Updates

EUR

Early Tuesday, the finance ministers of the eurozone agreed on the terms of a 30 billion euro bailout for Spanish banks. The finance ministers will meet again on the 20th of July, after having obtained approval from their parliaments or governments.

The euro dropped against the dollar, in Asian trading hours, as markets’ risk appetite decreased after disappointing Chinese trade data. The euro stayed weaker after a report showed French industrial output dropped in May.

GBP

Yesterday sterling hit its highest level against the euro since November 2008, as investors concerned about the eurozone debt crisis and slowing global growth considered sterling as a safer alternative to the euro. In the absence of any UK data releases, trade in the pound was subdued, prompting eur/gbp to track moves in the euro against the dollar, which hit which hit a two-year low on Monday.

The pound looked set to climb further against the euro despite the Bank of England opting to pump another 50 billion pounds into the UK economy to stimulate growth last week. Some analysts said policymakers may opt for even more stimulus later in the year.

USD

Investor’s increased appetite for US government bonds in recent weeks have been boosting the dollar. In a sale yesterday the US Treasury sold three- and six-months bonds with negative yields for the first time.

Minutes from the Fed’s June meeting, to be released on Wednesday, will be scrutinised for any hints of further quantitative easing.

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Written by Tom Tong

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