Daily Market Report - 22/12/2015

A quiet day in the markets yesterday in terms of announcements, however we did see some GBP weakness throughout the day with the Pound losing ground to the USD and also the EUR.
The main news out in the Eurozone yesterday was the Spanish election. There was an inconclusive result, with the ruling Popular Party receiving the most votes, but not enough for an overall majority. This could see the liberal party and the anti-austerity party Pedemos forming a coalition in order to gain a majority. This didn’t seem to have a very negative result on the Euro though as we saw some Euro strength against the USD and the GBP. In Spain yields on 10y Govt bonds, which move inversely to prices, rose 14 basis points to 1.824%, the highest in around a month.
Key Announcements:
USD – 13:30 – Gross Domestic Product Annualised (Q3)
Year Round up:
2015 started with a bang. In January we saw the SNB de peg the Swissie from the EUR, unexpectedly. This sent shockwaves through the market and landed several currency brokers and traders in hot water. The meeting where they decided to abandon the peg, was unplanned and happened three days after describing it as the “cornerstone” of their policy. Seemingly they were trying to pre-empt the launch of the ECB’s quantitative easing programme, and de peg as opposed to delaying the inevitable.

The next major movement we saw in rates was as the Greek crisis began to gather momentum. This was a result of Syriza the anti austerity party being elected on a mandate of not accepting budget cuts, and increasing public spending. This was in contrast to the terms of their previous bailouts.

This reached a crescendo in July as they missed several debt repayment deadlines. With Alexis Tsipras and his anti austerity party Syriza waxing lyrical about how they were not going to back down over their policies, until he eventually did a u turn and sacked his finance minister. At the height of the crisis we saw rates of GBPEUR1.44, until normalising in the 1.30’s once a new debt financing deal was arranged.

The next big movement for the EUR was the looming ECB decision which happened in Dec. Mario Draghi had given several dovish comments in the run up to this decision. With the market pricing in an increase in the amount of QE as well as an extension of the programme. However when Draghi made the announcement we saw the market drop three cents, from over 1.40, back into the 1.30’s.