Marc Morley-Freer, Head of Private Client Business at Smart Currency Exchange,
Marc Morley-Freer, Head of Private Client Business at Smart Currency Exchange,

A ‘tax on savings’ as part of a proposal to help secure IMF, ECB & EU funding for Cyprus has been seen as a complete contravention of the ‘deposit insurance agreement’ signed by all EU countries in October 2008. The wider effects of this action, for a relatively small sum amounting to €7billion, could be further pressure on other Eurozone countries looking for a bailout. A reigniting of Eurozone bank concerns is likely.

The Euro opened Monday trading over 1% down against Sterling so for the short term it looks like we have seen the worst of Sterling weakness. With the votes not yet placed to ratify the proposal only time will tell if this is the start of a slippery slope for the Eurozone or if the central bankers will wake up and smell the coffee. For the sake of €7billion (which is a tiny amount in the scale of things) it’s a huge gamble and one that is no doubt being played out by the faceless politicians and nameless bureaucrats.

With investors and private clients likely to be moving their funds to safe haven banks and funds we could well be on the verge of another run on the banks similar to the run on Northern Rock in September 2007. In all likelihood USD and Sterling strength is expected in the short term. Elsewhere, with the speculation of a bid from the Qatari investment Authority for M&S and a strong showing in the FTSE 100, investors have a lot of choice for their money.”


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