EU agrees banking union

Late last night EU leaders finally agreed to a banking union between member states, adopting a legal framework by the end of 2012 giving the ECB overall control of the supervision of EU banks.EU agrees banking unionThe rapid pace of reform is being cheered in the markets this morning by a rise in the value of the euro, but the key question of whether the EU rescue fund will be able to inject cash directly into stricken banks was left unanswered after pressure from the Germans.

Overall the move is a very positive one for the euro and is likely to continue the momentum the single currency has built up over the last week as periphery bond yields continue to fall.

Italy also managed to get away almost €18 billion in bonds yesterday, something that 6 months ago would have been impossible.

The ECB can be pleased with its OMT announcement so far.

Around the markets today German PPI data was marginally higher than expected, 1.7% against the consensus forecast of 1.6%, and we look towards UK public sector net borrowing data and Canadian CPI date this afternoon.

The UK government has announced that several large pension schemes have signed up to the pensions infrastructure platform, a policy aimed at kick starting the economy by using money from pension funds in under-invested road and rail projects.

The size of the funds is expected to reach £2 billion and is expected to launch in early 2013.

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