Market Commentary

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With sterling holding at a stubborn 1.145 – 1.158 range on interbank trading it would appear that the markets are holding their breath.  The coming week will definitely bring volatility, but the real test will be how quickly the support and resistance levels can stabilize, especially following the German local elections on 10th.

 

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With sterling holding at a stubborn 1.145 – 1.158 range on interbank trading it would appear that the markets are holding their breath.  The coming week will definitely bring volatility, but the real test will be how quickly the support and resistance levels can stabilize, especially following the German local elections on 10th.

 


The IMF have said that Greece must make a 10% reduction in their budget deficit within two years, and this will come from significant public sector cuts, including services, pensions and salaries.  The contagion effect of this sovereign debt risk is difficult to fully assess at the moment, but with yields European government bonds rising those at risk economies will be compelled to act swiftly and insure against default.

Obviously the UK election is the most significant event of next week.  Cameron appears to be pulling away in the polls, and The City has responded positively to his keenness to respond quickly to deficit, but sterling remains a cautious buy.  Traders inclined to ‘short sell’ the euro will buy back, so we may see a more aggressive but relatively short lived correction again the pound if the election results in the hung parliament.


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