Some comments by Bini Smaghi, chief of the Italian central bank, that the troubles of the Eurozone could spread to the U.S., U.K., and Japan, and reassurance by J.C. Trichet that the Euro is a safe currency, that they never comment on currency interventions, are the final highlights of this turbulant week. Our interpretation of the latest leap in the Euro remains that it is a short squeeze phase forced by panicky deleveraging which can trigger a more significant correction. The feeling in the trader community confirms this interpretation, although reliable data is hard to come by.

Maybe the main feature of the week, apart from price fluctuations, was the speculation about a coordinated intervention by major industrialized nations to prop up the Euro. There is little doubt that this will be the outcome if the currency survives the current crisis through depreciation, but the present levels are still very far from justifying such a course, given that the Eurozone is in fact in dire need of currency depreciation, both for business competitiveness, and for the sake of Eastern Europe, where Eurozone banks hold major assets. We expect an intervention only if the currency goes below parity, and only in case of unsustainable volatility, indicating panic across major markets.

Note: Past performance is not indicative of future results.

This week saw major liquidations of carry trades, sell-offs in the stock market, volatility in sovereign CDS, and continued worsening of LIBOR rates across the globe. Crucial banking legislation in the U.S., and more declarations by the SNB that they will keep buying Euros "indefinitely" if conditions warrant such a course, were some of the other highlights.

The technical picture seems to indicate a brief consolidation, but we believe that the rally may still go on if there are no negative news from the Euro area during the weekend. Given the severity of the present crisis and the selloff in the Euro, we could even have some positive comments, accompanied by encouraging news, since politicians appear to be in or very near panic mode at the moment. We believe that the final act of the present meltdown will take place in Q3 and Q4. We will of course update you on Monday with further developments.