The Euro has slipped today against the majority of the majors. The EUR/USD broke into sub 1.30 territory before retracing back in afternoon trade on Thursday. The GBP/EUR pair has jumped over 1% from a low of 1.19 on Monday to a 1.2070 high.

The main reason for the Euro weakness was a loss of confidence in policy makers relentless positive tone over Greece and European sovereign debt crisis. There seems to be a growing rift amongst the EU member countries as to what to do over Greece and the heightened risk for contagion is the real issue that is weighing on investors’ confidence.

The situation in Greece is without doubt escalating behind the scenes. This is despite bullish rhetoric from European policy makers and goes against statements from the majority of key political figures. It is important to consider the change in stance in the past six months amongst leaders. Previously both the leaders and markets involved factored in no chance of Greece leaving the Euro. Now it would appear that there is a growing rift and markets believe they Greeks could be forced out.

The arguments remain, the Germans don’t want to pump money into a failing investment, yet the consequence of turning their backs on the Greeks could be worse. It could lead to the renationalisation of Europe and leave behind a deeply fractured continent.

Elsewhere in the currency markets the Pound has gained as markets seem to be treating the UK currency as a safe haven deposit. This is despite Moody’s news on Monday and is arguably due to the UK’s close proximity to the struggling Euro-zone. As tempers flare in the Euro-zone the appetite for the Pound from European investors seems to augment. The UK is well ahead of the curve for tackling our budget deficit and although the BoE maintains a cautious tone we remain somewhat optimistic on the Pound in the short term.

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