Stock markets rallied in US, UK, France & Germany recently on the back of the €100 Billion bailout for Spain. This however was short lived as Spain’s borrowing costs were at the highest level on record since the beginning of the Euro in 1997.

Stock markets rallied in US, UK, France & Germany recently on the back of the €100 Billion bailout for Spain. This however was short lived as Spain’s borrowing costs were at the highest level on record since the beginning of the Euro in 1997.

Spain’s 10 year bond yields hit 6.83% yesterday and 18 of its major banks were downgraded by Fitch, including Santander, which has created further concerns in the Eurozone. Italy failed to keep themselves out of the red as their debt reached $2.4Tr, which is double Spain’s debt and the cost of their borrowing rallied to 6.17%.

We all have seen what bailouts have done for Greece…..so much money has been pumped into an economy that has not improved and now markets feel Spain will be a bigger issue than Greece! €100 Billion called so far, but how much more will be pushed their way?

UK manufacturing output for April was worse than expected, dropping 0.7% MoM and 0.1% YoY as stated by Office for National Statistics. This has raised concerns over the progress of the UK economy this year and the ONS predicts that the UK may not start to grow until 2014. UK markets will be waiting to hear tomorrow’s speech from Chancellor George Osborne and BoE Governor Mervyn King who will speak at the annual Mansion House dinner.

Nearing the Greek elections the Euro is likely to stay under pressure and the US dollar may hold its strength as a safe haven.

For a live exchange rate login to RationalFX now, or call +44 (0)20 7220 8181