US congressional leaders, who met on Sunday, again failed to come up with a suitable solution to the US debt debacle and as long as the group remains at an impasse, the US dollar may come under significant selling pressure. The Greenback fell to a two-week low against the euro towards the end of last week and sharp losses against sterling puts the US dollar firmly on the back foot. Sterling opened at over five-week highs against the US dollar supported by both uncertainties over US debt along with better-than-expected UK economic data last week. Despite this more positive tone, the pound may again find itself under heavy pressure as analysts brace themselves for their first look at second quarter growth figures due out. Euro gains on the back of the Greek announcement could be short-lived as investors begin to grasp what it actually means for the single currency area in the long term. Market volatility is again expected to be the theme for this week and as such, both the Japanese yen and the popular Swiss franc are the main benefactors. In response, Japanese officials have already warned markets against unwelcome gains in the yen while in contrast, the Norwegian local currency remains wounded following the recent attacks which left almost 100 people dead.

Sterling

Sterling opens at over five-week highs against the US dollar supported by both uncertainties over US debt along with better-than-expected UK economic data. Upbeat consumer demand figures coupled with an improvement in the UK’s debt position helped sterling benefit from a rally in riskier assets at the end of last week as investors cheered developments in Greece.

US dollar

While keeping one eye on developments in the eurozone with Greece, investors should grow cautious towards the US dollar as the week gets underway. Uncertainty remains high over the US’s ability to come to an agreement over raising its debt ceiling or risk facing a ratings downgrade which could be extremely detrimental to an already fragile economy.

Euro

Euro gains could be short-lived as the pick-up in risk appetite evidently showed that investors were impressed that eurozone leaders were able to muster a deal, however, most would agree that it is still not a comprehensive solution to the area’s fiscal woes.

Japanese yen

The yen continues to trade near intervention territory, close to levels last seen in March during Japan’s earthquake disaster. Uneasiness over the US’s ability to negotiate a new debt ceiling is encouraging safe haven flows into the yen, prompting more verbal threats from Japanese officials.

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