Germany votes to support Spain

In Germany yesterday the lower house of parliament agreed to contribute to the estimated €100 billion pot to bail out ailing Spanish banks which are suffering from their domestic property crisis. Germany votes to support SpainThis was seen as a make or break decision for the bailout which is expected to be pushed through European parliament later today.

However the Germans have delayed their decision on whether the ESM will be able to recapitalise banks directly.

Yesterday we saw a choppy day for GB Pound/euro with the pair pushing through the 1.28 barrier for the first time since November 2008 as the Spanish bank crisis dampens investor appetite for the euro.

This led a run on Spanish bond yields as investors wanted greater payments to buy the ailing countries debt, which pushed them over the ‘critical’ 7% level again this month.

This is in contrast to Italy where credit ratings agency Fitch announced yesterday that it is keeping Italy’s rating at  –A which shows an increasingly different story to the two notch downgrade by Moody’s and one notch move by S&P.

The IMF noted that the UK should rethink its austerity first approach as it is dragging down UK growth which was cut by the fund from .8% this year to .2% with retail figures this week coming in weaker than expected affected by the wet weather.

However, it appears the UK is trying to move away from the EU being its primary trading partner with over 50% of exports going to countries outside of the EU with a focus on emerging economies such as Latin America.

GBP/USD has been rallying this week apparently off of the expectation that fresh new stimulus measures will be introduced out of America after Fed chairman Ben Bernanke did not rule out a third round of QE if the situation called for it.

GBP/EUR has been racing this week pushing to highs from November 2008 and going over the 1.28. EUR/USD has been dictating trade this week with large movements being attributed to the inter-day trading.

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