Last week a string of strong US data led investors away
from the ameliorating American economy into riskier currencies, causing the dollar to fall against many of its counterparts. Another safe haven, the yen, has been
similarly afflicted with losses against its riskier counterparts, whilst the euro has
been the largest beneficiary in the last month, rising 1.9%.

Last week a string of strong US data led investors away
from the ameliorating American economy into riskier currencies, causing the dollar to fall against many of its counterparts. Another safe haven, the yen, has been
similarly afflicted with losses against its riskier counterparts, whilst the euro has
been the largest beneficiary in the last month, rising 1.9%.

As a recurring theme, we note that this positive
sentiment rarely lasts long. Negative data from East Asian economies,
signalling slowing growth, and expected poor German production data is likely
to lead the same investors rushing back to the safety of the dollar.

Having placed the onus on governmental leaders to request ECB funding, Draghi will now be waiting for the Spanish prime minister to call,
how long will he wait is the big question. Many believe a bailout announcement to
be after the Spanish local elections, but the key decider the height that bond
yields reach.

It is another busy week in Europe, as finance leaders from
the EU meet today to discuss bailouts, banking and the region’s unity. Rajoy
and Hollande also meet in Paris later in the week, with the expectation that
the Spanish prime minister will disclose further plans about the country’s next
step.

Meanwhile Germany’s chancellor, Angela Merkel, is making her
first visit to Greece since 2009, a move that will hope to quell debate about
the troubled nation’s existence in the single currency. However despite recent
praise over its commitment to austerity, negotiations over a third tranche of
bailout funds have stalled, leading some to question, “How much more austerity
can the nation take?” Locked in a battle over a troika release of a further
€31bn, contracting growth and crippling cuts have led to economists sentiment
that we are merely plugging an ever expanding hole in the Greek economy.

Today’s Key Announcements:

• All Day – EUR – Eurogroup Meetings
• 09.30am – EUR – Investor Confidence
• 11.00am – EUR – German Industrial Production – expected contraction
  to -0.7% from last month’s 1.3%