European bank stress tests were widely criticised on Friday, with one analyst declaring it as bad as the 1979 Irish driving test. In 1979, in an effort to win votes the Irish government declared anyone who had taken their test twice and failed would automatically qualify for a licence – resulting in around 40% of the population driving without ever having passed their test!
This sentiment was shared across the market, with many deriding the fact that the stress tests never accounted for a country not paying its debt back, even as Greece teeters on the brink of default.
In the end, eight out of the 90 banks failed with five small regional Spanish banks, two Greek banks and one Austrian failing to make the grade, with another 16 banks only just scrapping through. On a positive note, all British banks were given a clean bill of health.
European leaders are due to gather in Brussels to discuss a second bailout for Greece on Thursday. The meeting will also discuss urgent measures to try and prevent contagion spreading to Italy and Spain, but with continuing differences about how best to tackle the crisis, reaching an agreement looks further away than ever.
George Papandreou, the Greek Prime Minister issued a rallying call for urgent and unified action stating “it is time Europe woke up”. If Europe doesn’t start taking decisive action we may have to start contemplating the unthinkable.
In markets overnight, the euro was under intense pressure with European dithering weighing on investor sentiment. The pound was trading at 1.1445 against the single currency, having been as low as 1.1062 only 2 weeks ago. The euro was also weaker against the dollar at 1.4049.
The dollar benefited from market jitters, with the pound lower against the greenback at 1.6073. Keep a close eye on US negotiations on raising its debt ceiling, with the August 2nd deadline fast approaching expect dollar volatility if the political deadlock between the Republicans and Democrats remains.
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Posted in Daily Market News on May 30 2014
FXstreet.com (Barcelona) - With the market jittery over the risks of contagion, the European financial sector is being put under the spotlight as another round of bank stress tests are to be released this Friday. In particular, the Spanish and Italian banking sectors are of noted importance as they both...VIEW FULL ARTICLE
Posted in Daily Market News on Jul 15 2011 by alex