Forex Fundamental Analysis

Until recently, the EU was expecting that growth within the 17 member Eurozone to come in at 1.8% next year.

Italy has become the next candidate for a bailout since its borrowing costs on 10-year bonds has risen to an unsustainable 7%. This has rekindled talk of a Eurozone break-up with more indebted and weaker economies forced out of a rump Euro. The consequences of this to the global economy would be impossible to calculate.

The Italian bond market is probably something that most Forex traders don’t pay much attention to. However, the 10 yield Italian bond has suddenly found itself a very important player in the Forex world.

The embattled Italian Prime Minister, Silvio Berlusconi, has survived numerous sex scandals and legal skirmishes related to his business empire involving allegations of tax evasion, fraud, bribery and even collusion with the Mafia.

On Monday, we had comments coming from Swiss National Bank vice-Chairman Thomas Jordan stating that the SNB “Is always looking into the situation.

The sovereign debt crisis is bad news for political leaders – on a personal level.

The gains made two weeks ago were largely reversed when Greece insisted that it would put the EU bailout to a referendum. By the end of the week, the idea was dead in the water and confusion ruled.

With all the drama playing out on the European stage, it is easy to forget that we are “recovering” from a global financial crisis.

While the Non-Farm Payroll announcement is arguably the “granddaddy of all announcements”, this month may actually have very little impact as the world is focused squarely on the G-20 summit.

A week ago, markets across the world were putting on substantial gains and the Euro was strengthening on the news that EU leaders had put together a package.

In what would have been one of the week’s major news items, had it not been for developments in Greece, the Bank of Japan has interceded in the foreign exchange markets to weaken the Yen.

The European market is becoming a bit of a merry-go-round as the Europeans continue to come together with patchwork plans to stem the tide of financial destruction in sovereign debt markets.

Just when you thought that it was safe to go back into the waters of the markets with the EU deal in place to support the banking sector and prop up the finances of any EU state needing a bailout, turmoil has returned.

Last week was a very positive affair for the world’s markets. Eurozone and EU leaders presented a plan which is designed to provide support to banks, provisions for further EU bailouts and an agreed haircut for banks that are Greek bond holders, should the need arise.

The deal thrashed out between the leaders of the EU and the banking sector on Wednesday is still sending shock-waves of euphoria through global markets and is boosting banking shares around the world.