Euro gains, but for how long?

The Euro enjoyed its first strong day of 2012 yesterday with signs that some confidence could be returning to the single currency. One of the main topics of discussion at the moment is the ongoing Greek debt deal. Negotiations had taken a turn for the worse over the weekend after the authorities asked investors to accept new bonds yielding 3.5% rather than the previously agreed 4%. The Greek government had hoped to complete talks by Monday, but as yet, no agreement has been made. However, Greek finance minster Evangelos Venizelos said progress was being made and this was one of the main reasons for the Euro strength. He has now set a new date of 1^st February to conclude talks. Although these comments have improved the confidence level of a deal being agreed, until any deal is signed, expect the Euro to remain weak as the threat of a default is still alive.

The Bank of Japan keep their interest rates fixed at 0.1% as the bank noted that the Japanese recovery is moving slower than expected. The strong Yen remains a problem for the economy with corporate revenues likely to be down as a consequence. The ongoing debt problems in the Eurozone remain the biggest risk to the Japanese economy.

Sterling has remained in the middle against its major rivals as the Euro strengthened against both the Dollar and the Pound dragging Cable higher with it. The main news out this week for the UK is the release of 4^th Quarter GDP with a -0.1% figure expected. This significant change in momentum has been priced into the value of the Pound though it will be a massive blow to the global recovery and could be the first of many negative GDP figures from around the World as a second recession starts to bite.