Relief Rally For Euro As IMF Provides Greek Bail-Out Funding

March 16, 2012 - Written by Minesh Chaudhari

STORY LINK Relief Rally For Euro As IMF Provides Greek Bail-Out Funding

The Sterling Euro exchange rate is 1.1998.

There was relief for investors holding euro-denominated assets yesterday afternoon, when the International Monetary Fund gave its ascent to €28bn of new bail-out funding for debt-burdened Greece. The payment was the last piece in the jigsaw for Greece to qualify for its next €130bn tranche of bail-out funding and will now trigger the remainder of the payment from the ECB/EU.

The market received the announcement with some relief, which saw the euro firm in the afternoon session, taking the GBP EUR exchange rate back into the 1.1900s once again.

It was a generally positive day for the single currency, following yesterday morning’s release of the ECB’s monthly report, which referred to a ‘stabilisation’ in European financial markets over the past four weeks. The report went on to suggest that recent eurozone data releases have suggested a firming in the region’s real economy. This was corroborated by yesterday morning’s eurozone employment data, which pointed to a quarterly fall of 0.2% in unemployment in the last three months of 2011.

Elsewhere, there was more worrying news for the ailing Spanish economy, following the recent announcement by Prime Minister Mariano Rajoy that the Iberian giant would be missing its debt target for this year. Yesterday’s cause for concern was provided by the Spanish housing market, as figures were released showing that domestic property transactions had hit their lowest level since 2007 in the last three months of 2011.

Meanwhile, Britain’s public finances raised headlines early yesterday, as leading ratings agency Fitch followed the recent action by Moody’s in placing the UK’s AAA credit rating on watch. This means that Fitch consider that UK gilts have a 50/50 chance of being downgraded in the short to medium term.

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