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Markets Gap Lower as Euro Debt Concerns Continue; G7 Meeting Fails to Suggest Joint Intervention An ominous tone marks the beginning of this week as the Euro gapped lower during the Asian session and equity markets remain heavy near their monthly lows. Risk sentiment is broadly lower on fears that the Eurozone crisis will continue to grow. German news agencies published stories this weekend suggesting that the Finance Ministry is preparing a plan to deal with further downgrades in the Greek credit rating and saying that government officials still see Greek credit defaults as a possibility. Bloomberg News also reported that the French credit rating could be downgraded this week, which would send treasury costs higher and put additional weight on the Euro. The data calendar for Monday is relatively quiet, with parts of Asia closed for national holidays. The G7 Finance Ministers meeting this weekend produced nothing in the way of coordinated currency intervention pledges but Japanese officials have reported that they have received no resistance toward unilateral action (a positive for USD/JPY). The USD/JPY is trading at 76.90-77.70 with the EUR/USD still seeing high volatility at 1.3490-1.3680. The Swiss National Bank will hold their quarterly policy meeting later this week. A great deal of attention will be paid to their statements but some analysts suggest that we will see little in the way of policy changes since the SNB already intervened in market operations many times in the last month and its aims for a floor in its exchange rate have apparently been met. The SNB’s policy statement will get market attention though, as analysts will look for the specific tactics the central bank plans to use in preventing additional CHF strength against the Euro. In Australia, trade data was released for the month of July, coming in at $1.8 billion. This is slightly lower than market expectations but we have seen surpluses from Australia for most of this year and this release is roughly equal to the average seen since the middle of 2010. Recent declines in coal exports were expected to have more of an effect on the commodity-rich nation but import figures were able to balance the total trade figure.
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