Another blow for the Eurozone as German unemployment rose to 6.8% causing the Euro to weaken early yesterday. Spanish and Italian borrowing cost continued to rise with Spain yields rising again above 7%. Italy managed to sell €5.42Bn in 5-10 year bonds with the latter costing as high as 6.18%. Economic sentiment in the EMU also fell more than expected to 89.9. However the Euro managed to recover slightly towards the end of the day as European leaders agreed to offer €120Bn for growth measures to help ease the crisis via the European Investment bank.

Another blow for the Eurozone as German unemployment rose to 6.8% causing the Euro to weaken early yesterday. Spanish and Italian borrowing cost continued to rise with Spain yields rising again above 7%. Italy managed to sell €5.42Bn in 5-10 year bonds with the latter costing as high as 6.18%. Economic sentiment in the EMU also fell more than expected to 89.9. However the Euro managed to recover slightly towards the end of the day as European leaders agreed to offer €120Bn for growth measures to help ease the crisis via the European Investment bank. Adding further clarity the ECB policymakers called for the EMS to have power to inject capital directly to the banks in need. Such a move would mitigate the funds channelled via the Sovereign which in effect would avoid increasing their deficit.

UK GDP declined further than expected. The final figures for the first quarter came in at -0.4% as oppose to-0.3% causing further pressure for the MPC to accommodate asset purchases as early as July. The risk of slow growth remains as the government cuts to come would further reduce our GDP.

In the US Jobless, claims rose again in the month of June. Even though the pressure remains on the labour market the US did do well in order to grow by 2.0% YoY. The US dollar was fairly volatile yesterday but the USD fell as US trading closed. Risk appetite seems to be way into the weekend.

This could be a great opportunity to buy USD as this could be a temp rally in GBPUSD. The Euro is still a good bid as events today could cause Euro strength.

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