It may be the start of a new week but the European debt crisis is lingering on like a bad smell that the Europeans just can’t seem to shift. With interest rates increasing last week the pressure will undoubtedly grow on Spain, Portugal, Ireland, Greece and Italy as they are all struggling with current debt levels. Italy is the latest in the firing line according to press reports over the weekend suggesting that they are edging ever close to the request of a bailout package. Reports suggest that Herman Van Rompuy, the President of the European council, has called an emergency meeting of top officials for this morning with the euro zone debt crisis top of the agenda.
US data released on Friday came in far weaker than expected with US non-farm payrolls coming in at an increase of 18,000 compared to the 95,000 rise that was expected. Although this data temporarily weakened the Dollar, it has since managed to gain back substantial ground against the Euro and return to some of its recent lower levels against Sterling. This volley of recent poor data and the negativity surrounding the world economy will only add value to safe haven currencies, so expect some short term strength in the Swiss Franc this week.
All of this may well have a slightly positive effect on Sterling as we feel that GBP/USD is near its lower levels at the moment and any negativity surrounding European debt is sure to send EUR/USD hurtling towards last month’s 1.40 lows. This week I would expect to see a downward movement in EUR/USD, GBP/USD to remain fairly range bound and GBP/EUR to creep gently upwards hoping to avoid the UK pessimist’s snipers scope.
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