This morning sees the real start to this week after yesterdays 4th of July celebrations. As we expected, markets were very quiet yesterday due to the US holiday. Even the announcement from Standard and Poor’s that they would classify the French banks rolling over of Greek debt as a failure which would change Greece’s rating to selective default did little to substantially shift the market.
My views have changed very little over the last few months and as I have said previously, the gains that were made by the US Dollar against both Sterling and the Euro were not unexpected. I do however believe that this is not going to last and over the coming weeks I expect to see the Dollar weaken and levels of 1.62-63 should come back into play.
For me, Sterling now looks very good investment value and at these low levels don’t be too surprised to see the pound start making some headway against both the Euro and the Dollar over the coming couple of weeks. Don’t get me wrong I’m not saying “1.20 GBP/EUR and 1.70 GBP/USD here we come” but these should definitely be long term aims for Sterling. The thing for me that rules out a big surge in the value of Sterling is the constant pessimistic attitude of UK policy makers seeing the doom and gloom in everything. Let’s be fair about it, even if you thought something was good value and wanted to invest in it, you too would be put off if those supposedly championing it were so negative.
An interesting article from today’s Financial Times by Martin Jacomb who is a former director of the Bank of England. He says basically that the only way out for Greece is to leave the Euro. He sees the motives of the EU in saving Greece purely as a way of trying to preserve the Euro and by adopting it in the first place Greece had made itself uncompetitive. His conclusion was that dismantling the Euro is the least painful course of action for both Greece and the EU.
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