USA Banks News

POUND
Sterling is hovering near a two week high against the US currency this morning and is trading back into 1.20 against the Euro. The pound is very sensitive at the moment to speculation of further QE happening in February and developments with the Greek Private Sector Initiative (PSI) talks. Today is a quiet one for UK economic data but this may well be the calm before the storm with Public sector borrowing figures due tomorrow morning, Mervyn King speaking in the evening, MPC minutes and preliminary (GDP) growth figures due for the last quarter of 2011 on Wednesday. There is also a raft of other data but the GDP number is particularly important as many expect it to show the UK economy contracted at the end of last year, providing further support for QE and forecasts that the economy is dipping back into a recession.

EURO
The Euro is trading relatively flat against the pound but has made further gains against a weaker USD, now trading comfortably into 1.29.

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Mario Draghi, the president of the European Central Bank, has announced a battery of emergency measures to rescue Europe’s crisis-hit banks and unblock frozen financial markets, as Europe’s leaders gather to discuss the future of the single currency.

The Frankfurt-based lender said it would cut interest rates for the second time in two months; make three-year loans to cash-strapped banks; and accept a far wider range of collateral, including mortgage-backed securities and other A-rated assets, in exchange for emergency loans.

Individual central banks within the eurozone will also be allowed to accept bank loans in exchange for liquidity, at their own risk.

Explaining the ECB’s decisions at his regular press conference, Draghi said tensions in financial markets presented the greatest risk to Europe’s economy.

“Intensified financial tensions are continuing to dampen the economic outlook,” he warned.

The scale of the emergency measures, which also included a cut in the reserve ratios which banks are required to deposit with the ECB, from 2% to 1% from January, underlined how concerned the ECB has become about the risk of a credit crunch taking hold.

Banks have already seen their funding costs rise sharply as the eurozone financial crisis has worsened.

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