Daily Forex Brief 03rd August

Daily Forex Brief London: Wednesday 3rd August 2011

Moving on to the next show in town The political theatricals in Washington have captivated markets for the past few weeks, but now the show is over, there's a feeling that the crowd is hungry for more. For Tuesday, there was a quick shift back to Europe to see what the supporting cast was up to. The spread of Belgian bonds over Germany's pushed out above 200bp for the first time since the start of monetary union, whilst France was also pushing higher (out to 75bp over Germany). Two of the past four trading sessions we have seen true de-coupling of Germany and France, so German yields moving lower as French yields move higher. The price action on the Swiss franc is also indicative of investors becoming more concerned with sovereign balance sheets, with yesterday's down-move on EUR/CHF the biggest one seen since the start of EMU back in 1999. The other thing we are seeing is banks hoarding cash, especially in the eurozone money market. All this is telling us that, despite the deals cobbled together on both sides of the Atlantic, the show is far from over.

Also in today's Daily Forex Brief: Moody's relatively relaxed on US ratings outlook Global growth concerns dominating Tuesday Why the Swissie stands out Funding markets becoming more tense