The markets have responded favourably to the agreed bailout of Spain’s banks. Eurozone ministers have agreed to lend Spain as much as EUR 100bn to fund its troubled banks. Equities in Asia and Europe have opened higher and Spain’s bond yields have also dropped back below 6%, reducing the cost of funding Spain’s debt.
The Euro also opened a cent higher against the US Dollar, hitting a high earlier of 1.2668 and ¾ pence higher against the Pound hitting a high earlier of 0.8155 (GBPEUR 1.2262). The Euro has however since pared the majority of these gains and currently trades at 1.2550 against the US Dollar and 0.8075 (1.2384) against the Pound.
As the week progresses the markets focus will turn to the upcoming Greek elections on June 17th. Many are viewing the elections as a referendum on Greece’s membership of the European Monetary Union. If Greece renounces its bailout terms, Greece’s international partners could stop providing the rescue loans which the country depends on. That could lead Greece to default and potentially force Greece out of the Eurozone.