Continued pressure for the euro

Due to the increasing uncertainty over euro land sovereign debt and further political concerns, the euro experienced its third consecutive week of decline against the US dollar.

The most positive results for the currency were achieved later in the week, which lifted EUR/USD from a five week low. Reports suggest that the ECB could lend funds to the IMF, who in turn would fund larger euro zone economies, thus circumnavigating the legal hurdles that the ECB need to tackle if they are to purchase euro sovereign debt. This week should be revealing as we will be able to experience the effect that these movements will have on the euro, along with the wider markets.

While debt yields eased due to ECB intervention in support of the euro, the results of bond auctions in Spain and Italy were disappointing, with some of the bearish sentiment appeased by aggressive peripheral bond buying by the ECB via the SMP, which is likely to have prevented the pair from suffering much larger losses.

Yields on 10-year Spanish bonds fell back to 6.4% from levels above 7%, while yields on Italian 10-year bonds eased to 6.7%.

The week ahead & Today’s News:-

Rightmove House Price Index

YoY  +1.2%    -           Avg House Price         -           £232,144

MoM -3.1%

Key points

  • Economic uncertainty has continued to scare off sellers, which has sent an early warning to sectors reliant on consumer spending:
  • The average asking price falls by £7,528 (-3.1%) in a month, which is the largest monetary fall since December 2007 and third largest percentage fall on record.
  • Increased  seller shortage fails to underpin prices, with listing numbers down 13% on previous months to the lowest November level since the collapse of Lehman Brothers, as prospective sellers postpone their marketing.
  • The early onset of seasonal slowdown has strengthened buyers’ negotiating power, as 70% of home-movers feel it is currently a “bad time to sell”, which provides opportunities for prospective buyers to swoop.
  • Winter bargain opportunities’ for investors have been fuelled by rising rents and intensifying competition among buy-to-let lenders.   

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