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The Euro has weakened against all but two of its most traded peers

The Euro has weakened against all but two of its most traded peers as a number of fears about the state of Europe’s economy rise to the surface once more. The concerns have the potential to spoil the calm and damage the confidence that saw the single currency soar to yearly highs last week.

The economies of the region have remained sluggish with little signs of a strong economic recovery in the South. Unemployment continues to rise across Europe and it is only thanks to Germany that the economic statistics appear as good as they do. Without Germany’s presence the outlook for Europe would be pretty grim indeed.

“Markets have been extraordinarily complacent,” said sovereign debt strategist Nicholas Spiro. “The prospects of a stable and reform-minded government in Italy are very slim. We think a nasty surprise is coming.”

In Spain, Prime Minister Mariano Rajoy has had to defend himself as opposition leader’s call for his resignation after he found himself at the centre of a corruption scandal. The EL-Pais newspaper alleged that it found documents that showed that Rajoy and leading members of the ruling People’s Party had received illegal payments.

The scandal has rocked Spanish politics and could impact on Rajoy’s economic policies. Public anger has increased with many Spaniards demanding to know why they should have to endure Rajoy’s austerity measures and tax hikes, when he and other politicians have allegedly been receiving illegal payments.

In Italy, Silivio Berlusconi has narrowed the lead on front-runner Pier Luigi Bersani and is threatening to dent Bersani’s chance of winning and forming a majority government.

On Monday the Euro weakened by 0.4% against the US Dollar after Spanish 10-year government yields rose to a six-week high.

“The market is realizing that there are still substantial risks out there, especially on the political front,” said a strategist at Commerzbank AG in London. “The dynamics in Spain are devastating because they have the potential to cause a lot of damage. If in the worst case we would get a new election in Spain, this would be a real shocker for the market.”

The recent run of gains appears to have been generated by traders and economists seemingly having a vein hope that the Crisis is/was over, but with the sheer number of issue still to be resolved it would be foolish to shut your eyes and pretend everything was alright. Greece is still in a quagmire of a recession, the economies of the Eurozone nations are still weak and unemployment remains at record high levels.

The Euro crisis is certainly not over.

As of 10:15 am

The Pound to Euro exchange rate is currently trading at 1.1576

The Pound to US Dollar exchange rate is currently trading at 1.5728

The Pound to Australian Dollar exchange rate is currently trading at 1.5097

The Euro to US Dollar exchange rate is currently trading at 1.3582

The Euro to Pound exchange rate is currently trading at 0.8635