Weekly review

BUY DOLLARS AND WEAR DIAMONDS

The Euro finished the week substantially lower against US Dollar on sharp declines in World Stock Markets together with continuing concerns over Greece and other Euro zone countries notably Portugal and Spain..Despite rallying calls following measures announced by Greece the markets remain to be convinced.The euro fell below $1.36 and dropped against currencies such as the Swiss franc, forcing the Swiss National Bank (SNB) to take the unusual step of intervening in the market.

German Industrial production unexpectedly fell 2.6%m/m (consensus +0.6%), adding to woes for the euro area. Previous momentum in growth seems to have waned, suggesting that the stimulus-induced improvement has faltered.

With many equity markets hovering near technical support levels the next weeks might indeed add to the risk aversion argument helping the dollar and Japanese Yen further.

Finance ministers have committed to continue stimulus policies but this does not add up when balanced with the need for controlling and reducing the huge budget deficits.All in all a delicate balancing act with recent equity moves perhaps indicating that markets had got ahead of themselves.

Non Farm payroll figures did little to stem the tide with the markets seemingly wedded to the stronger dollar and yen view for the time being.Technical trends remain downward for the Euro dollar although very oversold making consolidation or bounce a distinct possibility this week. The situation with the Greek problem will be watched closely and if speculators continue to have the upper hand then the Euro will undoubtedly suffer.

Sterling also suffered against the dollar and is now testing some big technical levels but was largely sidelined- The outlook for the UK and the pound, however remains vulnerable and talk of hung Parliaments will do little to help.