Ireland in turmoil despite bailout agreement
23/Νοέ/2010 • Currency Updates•
The Irish Bailout is dominating the markets and the political agenda in the UK as George Osborne continued to stress the UK will be at the forefront of an international bailout of Ireland. George Osborne described the country as a «friend in need», and despite recession in the UK, stressed the importance of helping out such a key trading partner. Despite concerns over the use of treasury funding to prevent a crisis in the euro, the Chancellor insisted it was «overwhelmingly in Britain’s national interest» to contribute around £7 billion in loans. However, euro-sceptics in the Conservative party, including John Redwood and Douglas Carswell, have objected to the aid offer at a time when the Treasury’s own finances are under severe strain. In addition, the Adam Smith Institute said that the Government’s decision to participate in the £77 billion bailout was a «bad deal» for Britain. Sterling fell against the dollar as it was dragged down by the Irish debacle but rose against the euro amid the turmoil.
One of the main beneficiaries of yesterday’s market turmoil was the dollar, with investors moving into the greenback as a safe haven amidst the political turmoil in Ireland and continued sovereign debt questions in Europe. The developments in the Irish sovereign debt crisis where the focus of the markets yesterday, causing a rise in prices of safe haven currencies such as the dollar and safe haven commodities such as gold. The dollar was up against major currencies, with the US dollar Index up 0.21% for the day.
The proposed Irish bailout failed to alleviate investor concerns as markets fall, bond yields continue to rise and traders dump the euro. The recent market turmoil surrounding the euro continued yesterday despite the ECB, IMF and UK backing the multi-billion pound bailout package announced over the weekend. Investors clearly had doubts over Ireland, and still held fears of contagion, as the yield required to hold peripheral Eurozone sovereign debt rose. Despite the bailout being seen as a positive by many, the political turmoil in Ireland was threatening to spin out of control, reaffirming market jitters as the requisite austerity measures for the bailout looked increasingly unlikely. The euro fell against both sterling and the dollar. More woe was heaped on Ireland as the credit rating agency Moody’s also talked about further downgrading its credit rating.