Market update Monday 21st

This week we have a lot of important UK economic data out, as well as the ongoing Euro crisis, so we are expecting a volatile week for exchange rates.

Last week the Pound lost ground against both the Euro and US Dollar, as rumours of an impending Greek departure from the Eurozone ironically seemed to give strength to the single currency. New concerns on Spanish refinancing costs also failed to make the Euro cheaper, so for now it seems we may have seen the top of recent Euro trading levels. With the crucial second reading of UK GDP due out on Thursday morning, sterling is susceptible to falling back further if the figures show that the UK recession is worse than already known. We also have the Bank of England minutes on Wednesday morning, which will reveal how close the Monetary Policy Committee were to increasing Quantitative Easing this month – again any signals that more QE may be on the way, would be negative for the Pound.

There is no important data due out today, so Euro debt and the G8 summit may dominate; the big question in the coming weeks will be whether an anti-austerity government will form in Greece at the elections on June 19th, and whether world leaders will put a coherent contingency plan in place to allow them to leave the Euro in that case. Whatever happens, we are surely in for more twists and turns for all major exchange rates in the short term.