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The euro touched a five month low against sterling and a fresh six month low against the dollar, as investors continued to penalise Greece further with relentless selling of its debt. The yield on Greek government debt continued to rise, climbing to its widest since Greece joined the Euro-zone in 2001.  Spain’s unemployment rate, the highest in the euro region, rose more than economists expected in the forth quarter. The unemployment rate rose to 18.8 percent from 17.9 percent in the previous three months. A preliminary estimate of January’s CPI released today is expected to show the annual pace of inflation 1.2%.
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The “Greek tragedy” continues with rumours swirling that the Greek` s approached China looking to offload € 25 billion of their debt. How the European dream is starting to crumble when on the back of the warning from the ECB that the Greek’s will have to sort out their own finances they look to the East for  a solution.

The euro has again tumbled on the back of this and € 1.40 is now the line in the sand. The spread of the 10-year Greek bond yield over benchmark German Bunds also hit a high not seen since Greece adopted the euro in 2001
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The British Pound came under some selling pressure yesterday as the advanced Q4 GDP reading disappointed with a weaker than expected reading. Economic activity in the UK expanded only 0.1% in the fourth quarter of 2009 versus projections of a 0.4% rise, with the annualised rate slipped 3.2% from the previous year versus forecasts for a 3.0% contraction.

The tepid pace of recovery in the UK, could threaten further downward action in the pound if once again the ratings agencies look to cut the UK`s debt rating.
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UK Quarter 4 GDP for 2009 came in + 0.1 %, below the forecast of + 0.4 % but signals that the UK has finally emerged from the recession- for now. The UK economy contracted 4.8 % in 2009 the biggest fall on record so a year to forget for the UK economy and the pound. The data was much weaker than expected and the pound fell from a high of 1.6268 against the USD down to 1.61 following the data. A spokesman for the Prime Minister affirmed that we are right to be confident but cautious about the economy- I would say more cautious than confident. The concern now is that the UK could slip into a double dip recession if the tepid growth experienced cools as we move through 2010.
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Little economic data today…therefore the markets will be left to their own devices for the next couple of trading sessions. Having said that, the Far East continued Friday’s trend in equities to finish lower on the session. Wall Street traders were spooked somewhat by the seemingly ever-more frantic measures that Obama is promoting to try and revive his flagging popularity and news that Bernanke’s re-election for a further term was in doubt just left any bulls side-lined. The re-appointment of the dovish Ben Bernanke is seen as vital for the continuation of growth in the US economy going forward…..
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The markets became very flighty yesterday afternoon as President Obama called for the curbing of US banks riskier activity. This led to a scramble to safer currency shores but the markets could not seem to work out where to drop the anchor. The USD gained and then lost ground, the Yen had good gains as did sterling in the end and the commodity currencies softened.  To get to this point we saw an explosion of volatility in the markets.

This morning sterling has weakened on the back of retail sales data which came in at 0.3% against the forecasts for a 1.3% number. This is disappointing for the retail sector especially as it was reflective of the Christmas period- still sterling was not deeply affected and is still nicely poised on the prospects of an official exit from the recession in next weeks GDP data.
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