EU summit results analysed by the money markets

The overall sentiment was that the EU summit was positive with a bounce in the euro and equities.  EU summit results analysed by the money marketsProgress has been made in Europe and this has been immediately reflected in the bond markets with Italian and Spanish bond yields down further although still high.

It will be interesting to see how the money market reacts over the coming days as the summit is scrutinised more fully- my thoughts are that the euro could shed its gains as we move into the week.

Following the EU summit where further clarity on Europe was craved we are only slightly clearer on the roadmap for Europe.

It is evident that many important decisions lie ahead and there is still room for fallout which is why the euro has only been bought into tentatively.

Momentum is required to build upon the progress achieved and the markets will turn negative if this is not realised.

This week we have central bank decisions from the Bank Of England, ECB and the RBA.

Sterling could come under some pressure as it is expected that the BoE will unveil a further £50bn of Quantitative Easing.

The injection of further QE will be to further drive the push for growth against a backdrop of a double dip recession and severe economic uncertainty.

The Pound is likely to weaken in the run up to the decision as QE is a negative for the Pound.

In Europe the ECB is expected to cut interest rates by 25 basis points again to try to reinvigorate the economy, in addition the ECB is expected to continue its support with liquidity.

Finally the Reserve Bank of Australia is expected to hold firm with the Australian Dollar gaining on this prospect.

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