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The turn of the worm against the Euro continued yesterday with debt yields and other risk barometers measuring European peripheral debt continued to increase. Yields across the PIGS rose as it became clear that Greece will have to take further money from authorities in a bid to stave a default. Of course any cash they take now or extension on the time scale of a previous debt facility is technically a default but the politicians will not call it that. It also increases the possibility of further ‘moral hazard’ on the part of other countries. Moral hazard is the difference in how a party behaves when it is not liable for any losses compared to when it is. So why should Ireland hike its corporate tax rate to get a better interest rate when the Greeks can get it by being rubbish? The can of Greek debt is just being booted further down the road. It will have to be dealt with soon or the jig is up.

GBPEUR has hit a 5 week high on this news while EURUSD is at 4 week lows as traders continue to dump the euro. It has bounced back somewhat from the lows we saw yesterday as Asian markets have improved risk sentiment after Chinese trade figures massively beat estimates.

We also wake up to a slight novelty this morning in that overnight data from the UK has been broadly sterling positive. The British Retail Consortium’s survey of April’s retail picture has shown the kind of increase we were hoping for with sales rising by 5.2%. The group puts this down to the glorious weather we had and the bank holidays which got people down the pub and spending some money. The Royal Institute of Chartered Surveyors have also published their monthly price balance survey which showed that more are seeing a price increases than a month ago. This stands in direct contrast to the poor Halifax numbers we saw yesterday and contributes to the volatile nature of the UK housing markets.

The market will not shift is view from Southern Europe today as we are due a Greek debt auction this morning. Following the ratings downgrade by S&P and the outlook shift lower by Moody’s it is a guarantee that we will see the yield on this issuance saw as, to all intents and purposes, bankrupt. Data is quiet elsewhere.

Latest exchange rates at time of writing