Spreadex Market Update
Eurozone peril
These extensive problems caused the ECB to stop monetary operations to some Greek banks. A bank run took place on Bankia with up to one billion euros being withdrawn whilst foreign currency dealer ICAP stated that it is ready to start dealing in Drachma.
Greece’s demise and potential exit from the Eurozone, dubbed the ‘Grexit’, seems to be gathering more speed. Fears of contagion and one of the ‘bigger’ Eurozone states following them led the Eurodollar to plummet to the January low of 1.264 with Moody’s intensifying the fear by downgrading 16 Spanish banks.
Mervyn King outlined the UK’s growth prospects as unusually uncertain in his inflation report and stated that the Eurozone is tearing itself apart without any obvious solution. In a nutshell the BOE slashed growth forecasts from 1.2% to 0.8% and raised near-term inflation outlook with the situation slightly worse than had been forecast in its February report.
The FOMC also joined the downbeat crowd with their minutes reflecting wariness about the strength of the recovery. US treasuries pushed forwards after details from the meeting revealed that more monetary support is ready should the economy recover falter. Several members were said to acknowledge that more stimulus could be necessary with some seeing risk inflation pressures building.
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