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The euphoric buzz of the Greek debt solution announced on Thursday seems to have already dissipated this morning with equity market futures suggesting a lower opening for the vast majority of stock markets after a red Asian session. There seem to be 2 main reasons for this: firstly, and most importantly, politicians in Washington seem unable to come to an agreement over the debt ceiling and deficit reduction talks and as such, we have heard the word “impasse” more times than I care to remember. Secondly, Moody’s downgraded Greece to the worst credit rating in the world.

In Washington there were a fair few scheduled talks between Democratic and Republican Leadership but unfortunately they seem to be going nowhere at the moment. US Treasury Secretary Geithner, Fed Chairman Bernanke and NY Fed President Dudley all expressed their belief that Congress would reach a deal by the August 2^nd deadline but the market will remain skeptical after House Speaker John Boehner walked out of White House talks. The Republicans and the “Tea Party” are trying to bring some fiscal responsibility to the Obama administration but there is a fine line between fiscal responsibility and playing chicken with the markets.I heard one talking head on CNN yesterday say “The Tea Party is effectively playing Russian roulette with the bond market and they will, with certainty, lose” and I couldn’t agree more.

In Europe, it has now become time for the politicians to justify to their electorates the plans they put into force on Thursday and Angela Merkel has already spoken of a vote in the German parliament on the changes to the European Financial Stability Fund after their summer recess. The euro lost some of its strength on Friday after printing 1.1294 against the pound and 1.4439 against the US dollar but with the increased risk seen in equity market falls has seen the single currency lose some of its luster. Gold has once again pushed to a new record high this morning as investors look for some sort of safety. We’ve also seen big moves from the Japanese yen and the Swiss franc.

This week will be governed by the debt negotiations in the US but also tomorrow’s first estimate of UK GDP for the second quarter. Following the slowdown in the manufacturing and services sectors we do expect that the figure will be lower than the 0.5% we saw last time round but the key is will it be negative? I doubt it but anything larger than a 0.2% expansion would be a real surprise. This will act as a weight tomorrow on sterling but in the mean time things are more focused on the US.

Today’s calendar is quiet.

Latest exchange rates at time of writing