Stronger Yen and Weaker Pound are the major movers this week.

The Japanese Yen proved to be the golden boy of the week. Risk aversion on the back of weaker US statistics namely Jobless claims, Manufacturing orders and Cosumer confidence led the Yen 3% stronger against the dollar and 4 1/2 % against Sterling.
The Euro was largely unchanged against the US dollar and may still be supported by the weight of short positions.

The situation in Greece remains the focus of attention and some further announcements of additional budget cuts could be announced as early as today.There has been rumors that following satisfactory action from the Greeks that the Germans will support their bond market possibly through the state-owned bank KfW group and other similar institutions in Europe.
There seems a good possibility that this may happen probably leading to a Euro bounce against the Dollar.The ECB would love to see a short squeeze on currency and bond speculators.
That said if the Greek population refuse to accept further austerity measures it still offers the possibility they will be hung out to dry.

I still favor seeing the 1.40 level before a test of the 1.30 level and lower. However, I also remain convinced that at some point the will be a sell off in Equities(and subsequent dollar and Yen strength) which thus far seem to have ignored the recent softer data.There seems to be two wildly different camps on the view for economic recovery or slide back into recession.
Sterling has once again found itself in the firing line. It is no coincidence that this has followed the improved position of the Labour party ( Today just 2 points behind the Conservatives in the Sunday Times poll).The market perceives that the Labour Party would be softer on addressing the UKs huge deficit and they are right. Sterling collapsed against the stronger Yen ( closing at 135.50 as against 141.5) but crucially to 89.50 against the Euro.

Undoubtedly there could be another Sterling crisis on the horizon as I have already alluded to. At the very least we may well se a test of the lows against the Euro (96 level) and talk of a break through parity in the months ahead. I fear that the UK could be IMF bound on a worst case scenario next year on the back of a Labour(Gordon Brown ) victory.

So the week ahead could again be dominated by Greece,possibly,a Euro dollar bounce? …………mind the gap.