Euro news is beginning to resemble a soap opera as a hive of activity continues to immerse the currency.
The latest in a long line of headline making news comes in the shape of a resigning negotiator, and a flustered king; as Belgium battles to achieve a government structure. Recent government negotiations appear fractured with Didier Reynders emphasising that the situation is rapidly becoming more serious. The resounding warning from the ratings agency - form a government or lose you’re A++ rating, is certainly ringing in the ears of financial markets as they tighten their trading defenses and the Euro weakens in value today. The financial stability of Belgium is currently residing in a caretaker government. Divisions within Europe were compounded further by George Soros warning that debt crisis contagion may create a Europe out of sync with some countries moving at a slower pace than others.
Falling UK prices brought down the value of sterling, Hometrack data detailed a general fall in UK house prices of 0.5%. This data whilst leading to a loss of market enthusiasm surrounding sterling, suggests that the Bank of England may have been correct in not raising interest rates despite growing inflation. An interest rate hike to deflate demand in the current economic climate may have paved the way for a bumpy economic journey.
Australian connections to the Asian market space, once again proved raw today as a combined impact from a downgraded Japanese credit rating and an Australian taxation increase rebounded to impact the value of the Aus dollar. A taxation increase was an inevitable outcome of Austalia’s attempt to contain the financial repercussions of the Queensland floods and will see the tax will be 0.5% for $50,000 earners and 1% for individuals earning over $100,000. Market interpretation of increased taxation remains varied with incoming US statistics from Bellwether Caterpillar and US home sales likely to collide with the Greenback and Ozzie pairing. Although Australian taxation has amplified, the market reaction seems muted by the rational reasoning behind this increase.
