Forex Flash: Cypriot uncertainty remains elevated - BTMU

FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that in Europe uncertainty surrounding providing further external financial support to Cyprus remains elevated.

He adds that according to reports, the Cypriot government is attempting to seek alternative funding measures after its parliament rejected the bank deposit levy plan. Russian PM Medvedev has heavily criticised the EU’s handling of the Cyprus debt crisis saying the Eurogroup should include Russia in their plan. He writes, “A speculated Plan B includes lowering the deposit tax to 3.0% and only on accounts worth over EUR100k. In order to avert the risk of a bank run until an acceptable agreement is reached the Cypriot central bank has extended the national bank holiday until next Tuesday.”

He adds that they are expected to reveal that business improved somewhat in March although remain consistent overall with contracting economic activity in the euro-zone. Further, he notes that the pound is continuing to stabilize in the near-term following the less dovish than expected BoE minutes which indicated that further QE does not yet appear imminent. Hardman writes, “The Chancellor’s update to the BoE’s policy remit in the Budget yesterday reinforced its shift to more flexible inflation targeting with more explicit forward guidance under new Governor Carney more likely than a more aggressive shift to a nominal GDP target.”