Safe haven currencies look set tobecome the 'dish of the day' again as investors become even more nervous over Europe’s debt situation. The US Dollar and Japanese Yen are the markets favoured weapons of choice and have further advanced in the last week. This looks set to continue this week as we could see further negative news from the Eurozone. The Spanish elections over the weekend ousted Spain’s Socialists as they became the fifth European government to be ejected from power over growing concern of Spain’s economy.
The US congressional committee also looks likely to fail in its efforts to reach agreement on budget deficit cuts for America which could also push investors into safe haven currencies piling further pressure on the Euro and Pound short term. If an agreement on deficit cuts can’t be reached it will trigger $1.2 trillion in automatic spending cuts. The November 23rd deadline is fast approaching for reaching a deal and leaks from Washington are hinting that this looks less and less likely the nearer the deadline gets.
So for this week we should expect to see a stronger US Dollar and Yen and further pressure on the Euro which could see EUR/USD head back towards 1.33. With slightly more pressure on the Euro this could help GBP/EUR see the 1.17 level again against the Euro at some point during the week.
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