Asset markets continue to be driven by sentiment and Friday was no different, equity markets globally continued their bounce back from the early week battering finish up, sending the traditional safe haven plays of the USD, CHF and JPY weaker while investors jumped back into AUD, NZD and CAD. The only piece of data from Friday was US retails sales that arrived at +0.5% vs. +0.4% consensus, therefore providing a minimal impact

We are seeing investors start to re assess the long term direction of the USD, with net shorts on the USD being pulled back quickly, particularly as global growth looks to slow.

French and German leaders Nicolas Sarkozy and Angela Merkel returned early from holiday as on Tuesday they will sit to discuss the long term stability of the euro currency bloc. What will be debated heavily is whether to have closer fiscal unity, including the use of collective EU bonds. Obviously the likes of Italy and Spain are in favour as effectively it will lower the borrowing costs for them and other troubled EU nations (and slightly increasing it in the stronger countries). Both Germany and France did comment negatively regarding it on the weekend, with the German Finance minister in a interview saying that he would “rule it out for as long as member states conduct their own financial policies”. French officials reiterated the tone saying that without common budgetary policy they wouldn’t be supporting it either.

Weekend reports also stated that the SNB was looking to set a lower limit of 1.10 against the euro that it would defend with a full range of arsenal. The bounce back in risk appetite late week has seen EURCHF move higher to but immediately after the announcement we saw it move to the 1.13’s. If sentiment once again turns negative we will see how seriously the market are taking this news.

Today sees a lack of data, however this week sees plenty of UK data with inflation figures, retail sales data BOE minutes. From the US we have inflation data

Latest exchange rates at time of writing