It's amazing how quickly the tide can turn..

Yesterday the Euro was in the firing line (and rightly so as the European debt crisis rumbles like a poorly directed soap opera), but today turns its attention to the US Dollar. We reported yesterday how the US Fed were getting close to running out of funds and had asked congress to raise the debt limit by $2.5 trillion. This now seems to have taken the short term precedent with the Dollar losing ground to a basket of currencies. There is even some speculation that the failure of the US to agree on austerity measures could end up resulting in a credit downgrade which will not go down very well with the markets.

We are not panicking just yet as it seems fairly common knowledge that the US would like to see the value of the Dollar weaken to make them more competitive and help in reducing their trade deficit that is evolving into an ever growing monster. Going forward the European debt crisis is not going to go away and over the coming months this will at times weight heavily on the Euro and I would expect to see further weakness to the single currency. Don’t be surprised if the Euro manages short term to push itself to the 1.4220 level against the Dollar where it has consistently returned to in recent weeks. Unfortunately the downside to all this is that Sterling will lose some of its gains against the Euro, but these are the perils you face when you are reliant on other currencies weakening to gain ground against them.

The Swiss Franc is still surging ahead in value much to the dismay of Swiss exporters. There are even some analysts that feel this trend will continue into the coming months and EUR/CHF could continue all the way to parity. The Swiss is the safe haven of choice at present and in the current economic climate there is no reason that should change.

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It's amazing how quickly the tide can turn..

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