ProgressiveFX.co.uk

The week closed with risky assts; GBP, EUR, AUD inparticular rebounding in a fairly unconvincing manner from recent lows after several days of predominately downside volatility as concerns intensified over the state of the global economy, weak commodity prices and fears of the viability of the US and UK banking sector in the absence of further Government support.

In the UK, the Labour Government is under increasing pressure to more effectively tackle the collapse in banking sector confidence and investors have sold off banking stocks aggressively with BARC and RBS particularly hard hit with Barclays suffering on rumours the management have not been sufficiently prudent in the marking down of assets and bad debt provision.

The weakest Britsh QoQ GDP data, 1.5% lower, since the early 80's further encouraged investors to short Sterling with the main beneficiary over the week being the Yen which reached new multi-year highs against GBP as investors sold higher risk currencies in pursuit of relative safety.

The Euro-zone also remained under focus with appalling economic fundamentals in Spain, Ireland and Greece dragging the single currency lower despite a relatively stronger scenario in the regions largest economy Germany .

Looking forward we are likely to see further volatility in EUR, GBP and AUD as bullish investors try to catch currencies at stretched RSI's hoping for a bounce whilst pessimists continue to short riskier currencies in anticipation of continued weakening economic data.