Portugal passes bailout review - aid tranche to be released

The main news this morning was that Portugal is to recieve its next €14.6bn tranche of aid under last year's bailout agreement, having passed the Troik's assessment. 

The market’s response has been fairly muted but it is definitely relieving news from Portugal.

The Iberian country is clearly next on the market’s ‘hit list’ and this next tranche is essential for eurozone confidence in the short-term. It staves off fears that Portugal is destined to follow the same path as Greece.

Portugal is making the right noises in ruling out the need for further aid but the market is very much in wait and see mode now, the cynics will say they’ve heard it all before.

Ireland has shown that aggressive reforms can actually work and return countries to competitiveness, so there is a precedent to follow there.

The OECD’s research shows that the periphery are actually working hard on their reforms, the problem is it can take a long time for all of the benefits to emerge, time the markets aren’t necessarily willing to grant countries like Portugal.

It will be interesting to see if tomorrow’s 3-year LTRO from the ECB relieves some of the pressure on Portuguese bond yields. Portuguese yields actually increased since mid-December’s LTRO and you’d assume they will be left out in the cold this time, which is a major concern.

Richard Driver
Caxton FX Analyst

Caxton FX Morning Report

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It was a fairly calm start to the week yesterday, with no data of any major significance and little new information for the markets to digest from the weekend. Rating agency Standard & Poor’s downgraded Greece to the level of “selective default” but the markets were unperturbed, needing no reminder of how serious matters have become there.


Today’s session should be a little more lively; we have a UK CBI realised sales figure released this morning, followed by some durable goods orders and consumer confidence figures out of the US.

STERLING/EURO: This pair traded pretty flat ahead of tomorrow’s cheap loan offering from the European Central Bank.  

STERLING/US DOLLAR: After fading a little yesterday, this pair is back in pursuit of $1.59, which it should achieve this week.

EURO/US DOLLAR: A fairly tame attempt was made at $1.35 but you can expect this level to be given a sterner test.

STERLING/AUSTRALIAN DOLLAR: This pair was once again on the back foot having reached the top of its 2012 trading range.

STERLING/NEW ZEALAND DOLLAR: Sterling also retraced back down below 1.90 thanks to decent risk appetite in US trading.

STERLING/CANADIAN DOLLAR: After a strong week last week, this pair has fallen off by more than a cent from its 2012 highs.