With Greece back in the spotlight as it struggles to secure a bailout tranche needed to ward off a potential bankruptcy, the Euro is deemed to lose ground alongside its British counterpart today. Likewise, fresh economic data due today are seen to further emphasize the debilitating effects of the debt crisis on the Euro Zone economy. Meanwhile, the Pound will likely be supported by news that the key UK services sector maintained its expansion in October.
Greek Prime Minister Antonis Samaras is expected to unveil a new austerity package to Parliament today which must secure parliamentary approval if the debt-strapped nation is to secure additional financial aid and avert bankruptcy. Amid a planned week of strikes and public protests in a show of public anger, Parliament is anticipated to vote on the package of 13.5 Billion Euros in cost cuts and tax hikes along with measures making it easier for firms to hire and slash workers on Wednesday. Approval of the package and the passage of the 2013 budget are essential to secure the 31.5 Billion Euro bailout tranche from its troika of lenders. In a speech aimed at galvanizing the members of his New Democracy party, Samaras expressed that such cuts in wages and pensions are needed to prevent the nation’s exit from the Euro. Nevertheless, the road is unlikely to be clear-cut as the protests are seen to pile pressure on coalition deputies whose parties have slid in opinion polls. On heightened fears that Greece will struggle to secure the aid and compromise its future in the bloc, the single currency is deemed to wane.
The recession in Spain continues to deepen as labor market conditions maintain their deteriorating trend. The Spanish Employment Ministry reported that the number of unemployed individuals rose by 128,200 in October, well surpassing September’s count of 79,600 and exceeding estimates of a rise by 90,300. The report further augurs poorly on the Unemployment rate, which reached a record high of 25.02 percent in the third quarter. Overall, 5.78 Million Spaniards are out of work as the debt crisis and tough austerity measures take their toll on the economy. With the country in its second recession in three years, Spain is under pressure to ask for outside aid to help deal with its debts. Meanwhile, investor sentiment in the bloc remains bleak as the Sentix Investor Confidence is predicted to remain in the negative this month. The index is estimated to come in at -20.7 points in November from -22.2 points in October.
In the UK, economic conditions are seemingly brightening as the surprise expansion in the construction sector is believed to be followed by modest growth in the services sector. The sector accounts for more than three-quarter of the economy, and continued expansion is deemed to boost growth prospects for the economy, which just got out of a recession. The Services PMI is projected to come in at 52.0 points in October, slightly lower than the 52.2-point reading recorded in the previous month. Considering these, a short position for the EUR/GBP is advised today.