Yesterday saw the Euro come under further pressure against a basket of currencies as markets await the results of the latest set of EU bank stress tests. After slipping heavily in the early part of the week on news that Italy is edging ever closer to requesting a bailout, the Euro managed to bounce back on news that the ever growing US trade deficit was growing ever larger and at a slightly quicker pace. Markets have been extremely volatile this week but we feel that further bad news is looming around the corner for the Euro and further bouts of weakness are due over coming weeks.
The latest stress tests themselves are under scrutiny as they were last time regarding just how much stress they are actually testing! It is thought that around 10-15 banks may fail this time, and it will be the volume of recapitalisation for the banks that fall short that will be monitored closely.
Despite continuing weak data Sterling has managed to hold reasonably firm against the Euro this week which leavesme fairly optimistic that our initial thoughts at the start of this month that 1.14/15 could be achieved is still firmly on the cards. If these levels are achieved over the next week or so it would undoubtedly be a good time to secure some Euros for short to medium term trades as Sterling is still prone to potential downside risk through sentiment more than anything else.
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