Sterling had a relatively positive week last week, hitting a 3 month high of €1.1550/£1 against the euro on Thursday. In a turbulent week for financial markets, the FTSE 100 closed the week down nearly 10% and events over the weekend did little to help that. Saturday saw credit rating agency S&P cut the USA’s credit rating by one notch from AAA to AA+ and last night European Central Bank President Jean-Claude Trichet announced that the ECB will start buying Italian and Spanish bonds in order to stop the sovereign crisis extending to these countries. Out this week we have key trade data for the UK and also the Bank of England’s inflation report. Many expect that the Bank will downgrade the UK’s growth forecasts so call in now for a live exchange rate.

In the euro zone, Spanish and Italian bond yields jumped to record highs last week as investors questioned the ability of those countries to fund their borrowing. Italy has now brought forward moves to balance the government deficit by 2013 and the ECB will now step in to buy bonds and keep the borrowing costs low. Many commentators now feel that the euro cannot go on in its current format. A fiscal union is the next logical step – the issue being that the German electorate feels it is bailing out the rest of Europe and has no control over tax levels in the bailed out countries. Call in now for a live exchange rate.

In the USA, investors awoke on Saturday morning to the monumental news that the country had been downgraded by rating agency S&P – losing the precious AAA credit rating. Naturally the move attracted criticism from all angles in the USA, but the key point is that the USA is the only country whose net spending as a proportion of GDP has increased since the start of the credit crisis, so this is hardly a large surprise. Expect to see significant volatility today so call in now to ensure you don’t lose out.

Elsewhere, the news from the USA and Euro zone over the weekend saw the Japanese markets open down 1.7% and the New Zealand stock exchange opened 3% down. Stock markets are plunging as a result of the weekend’s developments so call in now to ensure you are adequately protected.

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