Sterling rose to a 1 ½ month high against the euro this morning, touching €1.1478/£1 as a lack of confidence in the euro saw it lose ground across the board. It was a quiet end to the week in terms of data for the UK, which meant that markets were squarely focussed on the results of European bank ‘stress tests’ on Friday. Investors were not impressed with the results – mainly because they did not adequately address the issue on everybody’s mind; that of sovereign default. Confidence fell and sterling made gains. With risk aversion and uncertainty prevalent in global markets, there are several key pieces of UK data this week that could see exchange rate volatility. Wednesday’s MPC minutes will help investors to gauge UK monetary outlook. There are also public borrowing and retail sales figures released on Thursday so call in now for a live exchange rate.

In the euro zone, the sovereign debt crisis hit new depths last week with European Finance ministers failing to reach agreement yet again on a debt restructuring for Greece. Italy came under pressure last week too, with a run on the country’s bonds leaving yields increasingly higher. Whilst only 8 European banks failed the stress tests, investors felt that the tests did not go into sufficient depth to uncover relevant issues. This has seen the euro lose ground against its counterparts this morning. Out this week, there is key PMI data and business survey figures but these are likely to be overshadowed by sovereign debt concerns.

The focus in the USA is increasingly on the approaching debt ceiling deadline and the frustrating deadlock between lawmakers. Essentially, the USA has reached its overdraft limit and needs to do some cost cutting before it can borrow more money, but lawmakers are deadlocked over where the savings should come from. Ratings agencies S&P and Moody’s have both warned that the USA’s AAA credit rating is at serious risk and there is the looming prospect of a default on US government bonds. The consequences of this would be far from trivial, so ensure you call in now to protect yourself from any adverse market movements.

Elsewhere, expectations for an interest rate hike in Australia have been pushed back over the last few weeks and came under further pressure on Friday. However, the currency has remained particularly insensitive to this given the interrelationship with China and its import demands. Call in now for a live exchange rate.

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