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.

Report
by Tim Lewis