The week ahead, market sentiment is still dominated by the lack of a long term solution in Greece. With a solution postponed until mid July Greece need to find another E28bn of cuts from somewhere. If you thought the populous were restless before I wonder what is going to happen now. Despite the BOE minutes on Wednesday and Bernankes statement on Friday the focus is bound to remain on Europe and the Eurozone with a raft of important data out. The market had fully priced in the events of the weekend so the Euro has remained undiminished but with the ZEW survey and the IFO out it may be interesting to see if the market players remain so loyal should chinks begin to show in Germany or France. If the Greek situation isn’t fully solved soon and maybe even if it is I fully expect the debt focus to move once again to Spain where the economy is showing even more signs of faltering further. With major rallies against cuts taking place it wouldn’t be wise to underestimate the strength of feeling in a country that has a 20% unemployment rate and a massive 43% youth unemployment.
I wonder how long before the voice of discontent is directed towards Merkel and Sarkosy as they appear to have an overpowering dominance in the decision making and policies of other countries within the Eurozone. Could that be because France and Germany are exposed to $90Bn of Greek debt alone?
The IMF lowered their forecasts on growth for both the US and the UK and coupled with the aforementioned statements this may put both currencies on the back foot in the short term but I fully expect both economies and currencies to gather pace in the medium term.
So this week will see plenty of action but could remain directionless unless those economic numbers show some frailty.
Have a good week
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