Monday, 9 March 2009

Watching the Euro and £ Sterling today

The Euro tried to rally after the weak employment data which was released last Friday but met firm resistance at the descending line which marks the 20 day EMA. Also noticeable on the chart pattern is the descending wedge formation which suggests that a downward break is becoming increasingly likely.

Also notable today is the weakness of sterling which is currently trading at $1.38 or thereabouts. The UK government is walking a very thin line with regard to its ever increasing commitments to the banking sector and a massive fiscal stimulus package and its proposed measures to finance these.

Quantitative Easing is a substantial gamble.

Even if allows the Bank of England to become a latter day purchaser of gilts there are plenty of overseas holders of existing UK Treasury issues who may be getting more nervous about long term prospects for sterling and sovereign credit risk.

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