Expect some calm and quiet in the markets today as it is US Labour Day and markets will be quieter because of the US holiday. The calming of today may well be followed by a storm as trading gets into full swing tomorrow with the European debt crisis still top of many traders’ agenda. We have said for a while that the Euro is well overdue a slump and what we are seeing now could well be the start of things to come. The Euro has lost ground in the last week and I would expect this trend continue as time goes by as there seems to be no way out of this mess for the single currency.
Bond yields across Europe continue to widen and Germany’s Chancellor Angela Merkel will be left reeling after her party lost weekend elections in her home state which could be a sign that the German public and growing tired of bailing out the rest of Europe. In the current economic climate were confidence seems to be King, it is the worst time for negative sentiment to spread across the Eurozone but maybe this is the price that has to be paid for sweeping problems under the carpet for so long.
So the outlook for this week is to see more negative movements in the Euro, this will be good for Sterling as it should be able to capitalise on the negative Euro momentum. Safe havens will still play a key role and I would expect once again to see some strength in the Swiss Franc after a recent bout of short term weakness.
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