We are starting a new video on Monday afternoons  featuring my glamourous colleague Georgia and her unique take on all things FX. I’m just sorry that you have to stick with me in the mornings!

Those pesky sovereign debt fears just won’t go away will they? The slight undercurrent of fear that has been flowing through financial markets since the beginning of the year is still strong enough to spook investors.

The euro was weaker as a combination of poor retail and durable goods orders from the richer European countries (Germany, France and Italy) and data that showed that the peripheral European countries (Spain, Portugal) have increased central bank borrowing from the ECB dramatically in the past 2 months. The pound was able to act on this as it continued its post-budget and post MPC minutes swell pushing GBPEUR up to the highest it has traded since November 2008 at 1.2223. the sterling rally did run out of steam towards the trading session however; the beginning of the a potentially quick slide below the 1.20 mark.

The picture was also muddied yesterday by a mixed set of data releases from the US. While initial jobless claims were 19k lighter at 457,000, Durable Goods Orders were still negative and shows a decreasing willingness for the US consumer to spend money. The fears of a double sip recession in the US are increasing with the Fed’s ultra-accommodative stance coming under scrutiny.

Sterling is slightly weaker this morning as a result of the latest Financial Stability Report by the Bank of England which is warning UK based banks that they need to refinance around £800bn of their borrowings by the end of 2012 and that “there’s a risk banks alleviate their own funding pressures by further constraining credit conditions for customers”. They believe that were this to happen then “That would dent economic recovery and so raise credit risk for all banks.” While these level are of course high they are no means as bad as those on the continent; this however would not protect them “against a conflagration of risk associated with a collapse of confidence in sovereign debt solvency around the world.”

Ahead of the G20 meeting this weekend in Toronto we would expect markets to be fairly quiet today although the data calendar does hold some surprise potential for us today. The mian release will the Q1 reading of US GDP (13.30) expected at 3.0%. This is slightly lower than the advance number and is being attributed to a fall-off in the trade deficit.