Spain finalise controversial mechanism for bail out of Bankia as UK house prices rise
29/May/2012 • Currency Updates•
A fairly quiet day for the Great British pound with no economic data released and small gains against the US dollar being the only real highlight of the day in the markets. UK house prices rose for a third consecutive month based mainly on gains in London according to Hometrack. Mervyn King and David Cameron met yesterday to create a plan in case of a eurozone breakup to protect Britain’s financial system and economy as fears of the ‘Grexit’ continues.
The single currency recovered from two-year lows yesterday as Greek opinion polls showed more support for the conservative New Democracy party in the June 17th elections. The largest poll saw the New Democracy party lead the far left Syriza party by as much as 5.5 percentage points. This would increase the chances of the next government sticking to the bailout terms agreed with the EU and the IMF and make a Greek exit from the euro less likely. Talks are also under way to organise the bailout package for Bankia, it is a slightly unusual bailout package due to the fact that it will not be a direct three year cash injection to the bank but instead the Spanish government, who will then own 90 percent of Bankia, will hand over billions of its bonds instead.
The rebound was only small, however, as concerns about Spain lingered, with Spanish 10 year bond yields rising, briefly breaking the 6.5 percent mark, and many investors fretting about the lack of growth in Europe.
Due to the public holiday in America, Memorial Day, there was very little news. It lost ground against sterling, the euro, and also lost ground for the 3rd successive session against Indian Rupee. This was the largest losing streak against the rupee for over two and a half months which is mainly due to improved global risk appetite.