httpvh://www.youtube.com/watch?v=9gBj-tS-JOA

You would think that EUR110bn would solve the problem. I can think of a lot of problems for which EUR110bn would eliminate the issue and leave enough money to buy everyone in the UK a pint and a fish supper. It will not fix Greece however.

Over the weekend details of the aid package were announced and it is now in the hands of the 16 EU governments to sign it into law. The main problem will probably come from the Germans as they are a) putting up the most money at around EUR22.5bn and b) have been the most vocal about making sure that Greece sticks to its austerity measures. These measures include a VAT hike to 23% and an extension of the retirement age from 53 to 67. There was rioting in the streets over these matters and who can be surprised; unfortunately the medicine for Greece’s ailments does not taste good.

The euro was pretty quiet yesterday due to the lack of liquidity in FX markets but we suggest that we will see further euro weakness in the days to come for a couple of reasons. Firstly the market will be a little disappointed that the package is not the EUR120bn that discussions on Friday suggested it would be and secondly the fears over Portugal and Spain are yet to be addressed.

The pound is flying into the most dangerous 2 week period in its 2010 trading life this week as the UK goes to the polls on Thursday. Most polls over the weekend continue to suggest that we will see a ‘hung parliament’. I do think however that the Conservatives will just nip it by less than 10 seats. Further details of our election coverage will be released on Wednesday.

In other news, the RBA have hiked interest rates in Australia by 25bps to 4.5%. This is the 3^rd consecutive 25bps rise. The accompanying economic statement was short however as they are publishing their Quarterly Statement on Monetary Policy on Friday.

Data for today is centered on the housing market with UK mortgage approvals at 09.30 and US Pending Hone Sales at 15.00. In-between we have EU PPI at 10.00.