With the Eurozone currently tearing itself apart Britain will not escape from this unscathed with Mervyn King saying that the risk of a storm ahead will be a great threat to the recovery of Britain’s economy.
David Cameron said that he will do whatever it takes to save Britain from the Eurozone crisis but stressed that we were not immune from the Eurozone's problems. Strangely EC president Jose Barroso kept his head in the clouds as he insisted yesterday that Europe was on the right track despite the current turbulence.
Crisis has hit Greece again, with the country’s credit rating cut further into junk yesterday ahead of next month’s elections. The country was downgraded from B- to CCC, four notches from the lowest category. As Greece has failed to form a coalition which has highlighted the lack of public and political support for austerity this can only lead to further disasters in the Eurozone.
A warning came from Greek President Papoulis that hundreds of millions of Euros had been withdrawn from Greek banks since the election on May 6th was a wakeup call on how bad the situation in Greece is. The question that boggles the mind now is why would you leave your money in the Greek banks?
16 Spanish banks have been downgraded by Moody's overnight. The outlook on the debt and deposit ratings for the ten out of the 17 banks is now looking negative and it is likely to result in steep stock market falls and a rise in borrowing costs.
World markets took another hit yesterday due to decline in factory activity which could hamper the US economic growth. With risk aversion dominating the markets the USD has strengthened significantly over the week against a basket of currencies. Protecting yourself against further movement will only make sense during this turbulent financial weather.
For a live rate login to RationalFX now, or call +44 (0)20 7220 8181