httpvh://www.youtube.com/watch?v=0MaqIS8dArQ

 Spain’s sovereign credit rating was downgraded to AA yesterday by S&P yesterday on budgetary concerns and follows Tuesday’s cuts to Greek and Portuguese debt. The euro weakened to fresh 1 year lows against the USD of 1.3112 and stayed under pressure against the pound as a result before being allowed to breathe after the Fed’s rate announcement.

Club Med has definitely had its time in the sun and I believe the market is getting ready to really test the ECB and IMF’s resolve. While Greece and Portugal make up relatively little of total EU GDP, Spain is a big hitter and accounted for around 9% of it in 2009. This will definitely get worse for the EU before it gets better.

This will likely manifest itself as a slow grind, a pressurisation even, more than whopping great big hacks and slashes at the value of the euro and a EURUSD rate of below 1.30 in 3 months time seems almost a certainty.

Our note yesterday in which I warned of the pre-election top out of GBP looks to have already been prescient. Sterling is likely to stay under pressure until we Brits go to the polls next Thursday. Tonight’s leaders debate should see some volatility as the 3 men debate voters’ key concern; the economy. You would expect Gordon Brown to perform well in this debate, something he needs after ‘Bigotgate’.

The latest polls show that the Conservatives may have extended their lead over the past 24hrs. A poll for Comres and The Independent put Cameron’s lot on 36% – up 3% – with Labour steady on 29% and the Lib Dems on 26%. The Conservatives need at least a 9 point difference to gain an absolute majority..

Overnight we had the FOMC report and, surprise surprise, they are going to keep rates low for ‘an extended period’. This allowed risky assets to move higher in the evening session and they have remained bid throughout the trade in Asia.

Today’s data mainly focuses on Europe with German unemployment at 08.55 and EU consumer confidence at 10.00. The confidence measure may take a knock due to the debt problems in Greece and Portugal but shouldn’t affect the euro too much unless horrific