httpvh://www.youtube.com/watch?v=18XCpbzraZU

Risky assets have rallied aggressively this morning after a Wall Street Journal article suggested that Germany was considering “a rescheduling of Greek bonds to facilitate a new package of aid loans”. It is believed that Berlin knows that it must lend Greece more money, without a haircut scenario for bondholders, before the country runs out of funds, a date that is believed to be around mid-July. Obviously any deal is going to be good news for the Eurozone and the single currency as it was pointed out last week that without a funding plan for 2012, the IMF will not release the next tranche of aid it is due to pay. Unfortunately I think that the political impasse will not be overcome; German politicians will find it increasingly difficult to justify to the electorate that they should pay more money to what many consider to be a basket-case.

We’ve also had further concern over the state of the Japanese economy this morning in the form of a ratings downgrade by Moody’s. The ratings agency is worried about the state of the fiscal situation in Japan with unemployment rising alongside poor manufacturing and factory production numbers. The agency also picks out “a weak policy response” hurting the political situation in the country and adding to the uncertainty in the future. The yen is down 0.75% against the dollar, 1.1% against the pound and 1.5% against the euro.

Further news this morning has helped the euro to a 3 week high against the US dollar as German retail sales increased by 0.6% in March with unemployment below 3 million for the first time since 1992. Some of this move has been undone however by poor consumer spending out of France which fell to 1.2% in April from an expected 3.7%.

Latest exchange rates at time of writing