The US Dollar still remains under pressure as the US have still failed to reach an agreement on raising the national debt ceiling. A resurgent Euro is capitalising after last week’s agreed bail out of Greece and the Dollar looks set to remain under pressure in the very short term. The White House commented yesterday that they feel that the chances of reaching an agreement are only 50/50 at this stage, although I feel it is slightly more certain that an agreement will be made. The possible fallout from the US defaulting could be catastrophic for markets and could also see the US lose its AAA credit rating.
As we reported yesterday Sterling still finds itself under a little pressure at the moment as interest rates look set to stay as they are for the foreseeable future and the outlook for growth in the UK has been cut. Sterling has lost ground against a basket of currencies overnight as investors are preparing for poor data today as UK Q2 GDP data is released at 9:30 this morning. Gold hit new highs yesterday as investors are scrambling to invest in safe havens which also accounts for why the Swiss Franc is so strong at the moment.
The market is very topsy turvy at the moment and until data stabilises in the UK and the US reaches agreement on raising the debt ceiling, there is an opportunity for the Euro to gain significant ground. In the longer term I still see bigger and more significant problems for the single currency which could lead to further downgrades and the eventual breakup of the Euro itself.
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