httpvh://www.youtube.com/watch?v=mYUuXik5PLo

The Irish economy became the first economy to slip into a double-dip recession yesterday as its Q2 growth figures were released at -1.2% against a previous of 2.7%. When I saw the figure I honestly thought it was a misprint; it’s really a horrific decline.

Trading yesterday had kicked off with rumours of an Irish bank defaulting on debt and has led to the Irish CDS, insurance against the Irish government defaulting, move to a record 5%. To put that in context, the market believes that Ireland is now twice as likely to default on its debt as Vietnam.

The combination of these revelations and the poor PMI figures from the rest of Europe that showed that growth is slowing across the European manufacturing and services sectors led to the euro losing ground against most of its competing crosses with GBPEUR moving away from the 1.16s into the 1.18s.

The problems are not just focused on Europe however as US initial jobless claims rose unexpectedly for the first time in 6 weeks. The market is unsure over the main theme in the markets at the moment which is which G3 currency do I sell; euro or dollar. The travails of the European single currency are well known with growth and debt concerns the main drivers behind traders’ bearishness while market participants are also worried about the prospect of further US quantitative easing. These will be the themes for second half of the year.

Overnight we saw markets nervous over rumours of further Japanese intervention with JPY losing ground on all crosses. So far no comment has been forthcoming from the Japanese Finance ministry.

Things to watch out for today include German IFO, a business sentiment indicator, is due at 9am and is set to slip although the main focus is on US durable goods orders.

Have a great weekend.