Sterling is about to start a critical week with heavy important data from the United Kingdom yet the start on Monday is light with lack of data from both nations leaving the GBP/USD subject to more volatility and likely losses as the sentiment returned pessimistic and risk averse after news that France lost its top credit rating.
The market was hit hard on Friday and sterling extended the weekly losses on news that S&P downgraded France and likely Austria while Germany was safe, all reports were not confirmed with the end of the European session on Friday yet the market saw that the possibility is high to be seen as soon as this week and surely Fitch’s assurances that France was unlikely to lose the rating is now a lost cause.
On Monday we expect the volatility to extend and the losses to be seen with the lack of fundamentals leaving the eyes on the debt crisis and if the downgrades are confirmed. The volatility will extend with auctions scheduled for the day from the euro area and that might see the end of the stability at the bond market and last week’s good auction run with haven demand all favoring the dollar to extend the gains versus sterling.
Originally posted here
