Europe’s ability to both manage and contain its debt crisis is now beginning to cause real concern for markets. Confidence is beginning to falter for the single currency as it hit its lowest level against the Yen in over a decade. The possibility of a Greek default is said to be as close to guaranteed as possible and the only way Europe can solve this issue is by throwing more money into what looks like a bottomless pit.
The US Dollar continues to strengthen and has re-established itself as the safe haven of choice in the current economic climate. Investors have turned away from the Swiss Franc after the Swiss National Bank set itself a pegging level against the Euro which it vowed that it would keep to no matter what the cost. This won’t necessarily be good news for the US who have their own problems with a high unemployment rate and an ever growing trade deficit. The US would in an ideal world like a weaker Dollar to help this situation and allow them to become more competitive for exports.
Rumours from Brazil about heavy interest rate cuts were circling yesterday as the currency has lost over 10% of its value against the Pound and US Dollar in the last month. Brazil currently has an interest rate level of 12% at present and that was after the last cut on the 31st August this year. Many investors are backing that the rate could be slashed by another 0.75% later this month as Brazil prepare for any knock on effects from the global slowdown.
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