Friday, July 15, 2011

On Tuesday, the Euro fell to a new record low in relation to the Swiss Franc, and to multi-month lows against the U.S. Dollar and Japanese yen; all considered by investors to be safe currencies during times of economic turmoil.

The Wall Street Journal reported earlier that recent comments from the newly installed head of the International Monetary Fund, France’s Christine Lagarde, resulted in a sell-off of the Euro. At a roundtable discussion in Washington, Lagarde noted that the IMF had not yet reached discussion of terms and conditions of a second Greek bailout plan. In fact, a representative from the IMF is currently meeting with Eurozone policymakers to draft such a new proposal. The yield differential between Italian bonds and German bonds has spread to more than 300 basis points, something not seen in over a decade and evidence of investors’ concern.

Adding to the Euro’s woes is the upcoming release of the bank stress tests on Friday. The European Bankers Association said that they expect the data release to shed new light on the Eurozone’s banking situation. Representatives of several of the Eurozone’s governments, including Germany, have requested that the association consider releasing fewer specific details for fear that investor panic will ensue. The inadequacy of the capitalization rates has been an issue with the European Central Bank, whose president recently called upon Eurozone banks to make every effort to put their balance sheets in order.

For the time being at least, an unsubstantiated rumor reported by the Wall Street Journal states that the Eurozone’s central banks’ purchase of periphery debt has helped to quell the downward momentum of the Euro.

Thursday, May 27, 2010

A US Coast Guard official said today that BP’s latest effort to plug the Gulf of Mexico oil spill has been successful in slowing the amount of oil leaking from the well.

The official, Admiral Thad Allen, said that the procedure, known as a “top kill” operation, has been able to block some of the leaking oil at the source, the top of the damaged well. The operation involves pumping material into the well to plug the leak before cement is used to permanently seal the leak. Allen said the operation has “been able to force mud down and not allow any hydrocarbons to come up.”

BP hasn’t confirmed the success of the top kill operation, saying only that the “operation is proceeding as we planned it,” and that there had been no major incidents thus far. Although the possibility of failure is still present, experts say that the longer the procedure continues, the less likely it will be that anything goes wrong.

The procedure began yesterday afternoon, after diagnostics on the damaged equipment on the ocean’s surface indicated that it could withstand the added pressure of the mud being pumped into the well. Although engineers involved with the operation wore concerned that the pressure of the mud might not be able to overcome that of the oil, that has thus far not been the case.

Separately, a group of US scientists announced new estimates of how much oil was flowing from the well, ranging from 12,000 to 25,000 barrels a day, far higher than BP’s original estimate of 5,000 barrels a day, a figure which BP warned was possibly inaccurate.

In a press conference Thursday afternoon, US president Barack Obama also announced new measures in response to the spill, which include:

• Suspending off-shore test drilling for six months
• Extending the moratorium on issuing drilling permits for an additional six months
• Cancelling the sale of leases for off-shore drilling.

In statements, Obama criticized the “scandalously close relationship” between government officials and oil companies in the past, saying that the Mineral Management Service, which is the agency responsible for monitoring off-shore drilling, had been corrupt for years.