Euro remains relatively steady despite rumours of a Spanish bailout

Modified: Friday, 8 June 2012 15:07 BST - Written by John Cameron

STORY LINK Euro remains relatively steady despite rumours of a Spanish bailout

Rumours were rife in the currency markets during this morning’s European session, that Spain is set to make a request for emergency funding in order to rescue its floundering retail banks. Spanish policy-makers were quick to refute the whispers, but this wasn’t enough to prevent a shift out of risk-laden assets including global equities and the high-yielding New Zealand Dollar. The primary beneficiary, as ever, has been the safe haven US Dollar, which has outperformed all of the other sixteen most-actively traded currencies on the day, taking the GBP USD exchange rate all the way down to 1.5404.

Elsewhere, there was little in the way of good news for the euro during today’s session; apart from the Spanish rumours, there was also the release of a doom-laden prediction regarding the future prospects of the French economy by the country’s central bank. Italian industrial production figures for April, released earlier this morning, also served to disappoint. Tellingly though, all of this bad news did not cause any major weakening of the single currency, which lost only a limited amount of ground against the Pound, meaning that the GBP EUR exchange rate spent the whole day mired in the 1.2350-1.2390 range. It increasingly appears that all of the bad news is ‘out of the bag’ for the euro, and fully factored-in to euro pricing, for the time-being, at least.

Meanwhile, the Pound had a neutral session, neither winning nor giving up much ground against any of the other majors. This afternoon’s Bank of England inflation report suggested that UK price rises are showing a high degree of resilience, suggesting that the BoE may not have the scope to further loosen its monetary policy. This may prove supportive to Sterling in coming months.

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