To add insult to injury the effects of the Eurozone crisis took a turn for the worst as S&P downgraded 9 of the 17 nations in the Eurozone. France lost its AAA rating alongside Austria, while Italy, Spain and Portugal were dropped two notches, with other peripheries also feeling the wrath.
French president Sarkozy is not keen on implementing extra austerity cuts due to the coming elections, but is keen on regaining the prime rating in the short term.
A meeting is scheduled for Tuesday 24th January and it is unknown how the downgrades will directly affect the fund, but it is possible that it will also lose its rating as it is now backed by weaker nations.
Investors are on the back seat as risk sentiment enters the Eurozone market, which could see the euro suffering throughout the week.
Greece failed to convince private investors to take a 50% haircut on the bonds they currently hold. The likelihood of Greece to defaulting as early as mid-March is increasing.
In the UK, conversations in relation to Scotland asking for an independent status were in the spotlight, which is a surprising move for Scotland, especially in current times as the Eurozone is seen as a sinking ship.
Sterling has managed to somewhat weather the storm, as GBP continues to test a yearly high against the euro. As a big fan of a weak pound we could see Mervyn King aggressively talk down the single currency in the next MPC minutes to help improve the UK trade balance.
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