Turning up the heat, Olli Rehn, the EU’s top economic official, dismissed suggestions that the eurozone was contemplating a ‘Plan B’ if the Greek parliament fails to pass the austerity cuts. "The future of the country and the financial stability of Europe are at stake" Mr Rehn stated.
Theodoros Pangalos, deputy premier of Greece was equally as clear "If we don’t get the money, we face a terrible scenario, with banks besieged by terrified crowds wanting to withdraw their savings and tanks protecting banks because there won’t be enough police to do it".
So the scene is set for a momentous day with the vote the most significant event since the single currency started in 2002. That said, it is also important to point out that even if the austerity measures are passed the Greek troubles will not be over, with debt at 150% of GDP and years of painful austerity ahead this story will rumble on.
Closer to home, figures released yesterday showed that real disposable incomes in the first three months of the year had suffered their sharpest annual fall since 1977. The figures from the Office for National Statistics revealed that real disposable incomes had falling 2.7% compared to 2010 - a repercussion of high inflation and low wage increases. With this squeeze on incomes restricting consumer spending, it is easy to understand why we have seen so many retailers entering administration in recent days.
In morning trading, you may have expected the pound to have gained against the euro, but you would be wrong! The biggest crisis in the euro’s history failing to drive the GBP/ EUR rate, with it actually trading down at 1.1128. The Euro was stronger against the dollar as well at 1.4383 with investors anticipating the Greek parliament will pass the new austerity plan – adding support for the Euro. The pound was a touch stronger against the dollar at 1.6012, with the greenback experiencing some weakness as risk aversion receded slightly.
What does this all mean for me? Well buying your EUR, USD, AUD or any other currency at the wrong time could cost you a fortune. There is no crystal ball but Currency UK can give you the information you need to make an informed decision.
Posted in Daily Market News on May 30 2014