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What was lost in the euro yesterday was regained late after EU leaders pledged to ensure financial stability in the Eurozone. They also had a message for Greece; you must pass the austerity measures vote next week so we can pay you what you need in July. The European leaders also agreed that additional financing will be necessary and surprisingly endorsed the Euro-group plans to make private sector participation voluntary.

This does not change the fact that we will have a parliamentary vote on it next week and the centre-right opposition leader will demand his troops vote against the measures. According to the FT, “he was sternly warned to back Mr. Papandreou by the heads of government. But heading into the meeting, he refused to back down.” This problem is far from resolved however the sense of relief will keep euro bid in the short term.

There has been a few Friday afternoons where things have got hairy for the euro and we expect something to rock the boat as we move into the weekend especially as everyone’s nerves are on edge before the vote. The contagion story will not be helped by the news that Moody’s has revised its outlook on the debt ratings of 13 Italian banks to negative from stable, suggesting a possible downgrade. Standard & Poor’s also downgraded Anglo Irish bank to CCC from CCC+ with a negative outlook.

There were further fears for the vote on the US debt ceiling yesterday which US Vice President Joe Biden is leading. They are said to have come to an impasse after two prominent Republicans left the negotiations. Ratings agencies have dictated that we must see the ceiling rise in early August or the US will be technically in default.

The EU leaders summit continues today. The schedule states they are due to talk about migration but you would expect that a lot of time and column inches will be devoted to the Greek problem as well. We also have the German IFO business climate index today which, like the ZEW earlier in the week, is expected to slip on lower optimism in the key manufacturing industry. That’s out at 09.00 BST. Meanwhile US GDP is expected to moderated slightly higher at 1.9% from 1.8% in the first quarter and Mervyn King is due to speak after the meeting of the UK Financial Policy Committee.

Latest exchange rates at time of writing