So has the European sovereign debt crisis been averted? 

That question will be asked again in two or three years time when Spain and Italy have to roll over their debts.  Vast sums of money have been lent to them to the tune of nearly €1 trillion to Italy and half that for Spain.  Throw into the mix the already bailed out PIIGS and any other possible future bailouts and the leverage of the existing EFSF to €1 trillion looks a little insignificant.  The announcements yesterday were nothing more than that with the only thing that was agreed being the recapitalisation of Europe’s banks to the tune of just over €100 billion.  At least our own banks come away from this with a clean bill of health as they won’t need to partake.

There are still lots of loose ends that need tying up and once they are there’s still no guarantee that this will have resolved the crisis altogether.  If the heavily indebted European nations are still uncompetitive and struggling to grow in a couple of year’s time, even sooner perhaps, then they will be engulfed by their debts and we’ll be back to square one again.  This time however it’ll probably be either Spain or Italy that will be the defaulting nations.

Growth is going to be key to helping us get out of this mess.  As we should have learnt by now growth is not sustainable or even viable by simply borrowing more.  Growth starts with confidence so at least yesterday’s talk might create some clear blue water so we now know where we all stand, even if the finer details still need to emerge.  But that confidence seems a long way from coming to the UK’s shores.  If you were to open the papers today all you would see is negative headline after negative headline.  Claims that the European deal is a fudge not enough, job losses across all sectors and falling output in our factories.

Now that much of the European issue is out of the way, at least for the next year or so we can focus on other things.  That means back to the same old sluggish UK economy story, protests and yes, let’s blame it on the government cuts!

GDP numbers from the US will be closely watched today with a jump expected from 1.30% last quarter to 2.40% so at least there’s a bit of good news across the pond.  We also get the weekly jobless claims and some pending home sales data which might lead to a little movement in US indices later.

A lot of sideways trading for the EUR/USD this week, as traders waited for the big news to come out of Brussels yesterday.  There was a mass selloff in the afternoon and the euro dived around 180 pips in an hour and half, as there was a lot of speculation over the outcome of the EU summit.  The news that Greek debt holders will accept a 50% loss and the rescue fund is to be increased to 1 trillion euros has encouraged eager traders this morning and EUR/USD and is trading at 1.4035.  This is a fundamentally-driven rally and so we could expect to see some further upside based on this news. 

The pound saw a similar drop yesterday against the dollar for the same reason the euro fell and in similar fashion it bounced back as well.  The surge hasn’t been quite the same this morning, but the gist is that equities are up, safe havens are down, and risk appetite is back on table.  Cable is trading at 1.5995 and sees support at 1.5955 and support at 1.6050.

After gold’s surge on Tuesday the bulls couldn’t follow thing through in yesterday’s session as we traded sideways for the session and that’s continued into today’s trade.  The precious metal is at 1715 looking a little directionless at the moment as the bulls find little reason to try and push the price higher as many traders are left scratching their heads following yesterday’s summit.  Gold is at 1715 at the time of writing.