The Euro has found itself back in the limelight again after the US debt situation looks to be heading towards a resolution. After the second Greek bailout and the nature of the package investors are now being extremely cautious about investing in EU Government bonds. The level of risk of buying Spanish, Italian and Portuguese bonds has now increased dramatically, which is the worst thing that could happen in a time when so many are scrambling for a safe haven.
In terms of safe havens, the Swiss Franc still seems to be the most popular choice. GBP/CHF moved down by over three percent during UK trading yesterday and EUR/CHF moved to a new record low. It doesn’t seem that this trend will subside anytime soon which will be giving Swiss exporters a major headache at present. When the Swiss Franc was around 5% weaker than it is now there was an amount of pressure building on the ground in Switzerland, and this looks like it will continue further and become more frustrating as time goes by.
So what comes next? Well I think a decline in the value of the Euro is well and truly on the cards and the Dollar is far from out of the woods. Sentiment is for lower growth forecasts expected for the US and some analysts are predicting a third bout of Quantitative Easing. This is bad news for the global economy and will only add pressure to an already fragile group of economies.
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