EUR and USD should be on back foot
US Non-farm payrolls, surprised to the upside on Friday and, the readings for May and June were also revised upwards. However, this only provided temporary relief for risky assets as, the S&P downgraded US debt from AAA for the first time in history. So far the effects of this downgrade are that the dollar has perversely strengthened against sterling due to safe haven buying. The Euro on the other hand has strengthened against both the USD and Sterling this morning, due to the ECB stepping in to buy both Spanish and Italian debt. Bond yields in Italy and Spain have since dropped back by .78% and .86% respectively. The Euro zone has effectively bought itself some more time to get its house in order and, with the ECB now acting as a rather fearsome guard dog of European sovereign debt it should keep the bond vigilante away from the European periphery for the time being. There are no significant economic data releases today, and markets are left to reflect on a G7 statement which noted, “In the face of renewed strains on financial markets, we, the Finance Ministers and Central Bank Governors of the G-7, affirm our commitment to take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence”. Hopefully this will help to stabilise the markets this week although it won’t take long for jitters to return if economic data releases don’t start to pick up. In this regard it is probably a good thing that Euro zone data releases are light on the ground this week.
Instinct suggests the ECB hace applied yet another band aid but how long before this one falls off in the bath!
What does this all mean for me? Well buying your EUR, USD, AUD or any other currency at the wrong time could cost you a fortune. There is no crystal ball but Currency UK can give you the information you need to make an informed decision.