Beginning in the UK, Sterling continues to be punished as investors capital continues its flight to safety and upon fresh news about the nation's fiscal woes. Conservatives are accusing the former Labour government of hiding billions of pounds in debt which the new coalition government will now have to manage. Shortly thereafter, the GBPUSD dropped nearly 300 basis points, illustrating just how sensitive the market is to threats to fiscal discipline. In the Eurozone, the weekend break failed to produce any respite for the selling of risky assets. EURUSD broke the critical 1.2330 level, trading down to 1.2235. In the end, the sovereign crisis itself may be more damaging to the EU and Euro than the actual fiscal deficits. The recent rift between Germany and France was the buzz on Friday as rumor spread the France has threatened to pull itself out of the Eurozone unless Germany completely supports the rescue plan. The rumor has been rigorously denied by both sides, but comments from Merkel and other German officials remain out-of-sync with the immediate needs of the EU. We believe it's worth mentioning that the announcement of the $1 trillion was slanted by the media as a victory for Sarkozy/France and a defeat for Merkel/Germany. Investor bias was further reinforced by the media with a slew of highly negative analysis (ACM included) and articles headlining The End of the Eurozone & The EUR at Parity. Further weighing down the Euro this week will be the ECB itself. The German newspaper Spiegel stated that the ECB's Weber, Stark and Wellink all voted against the bond-purchasing plan. The information underscores that there is not a general consensus in the ECB during this crisis and that perhaps the independent nature of the ECB, as championed by Trichet, has been compromised. On the other side of EURUSD, the FOMC will having its first meeting since the EU crisis began. The USD continues to be safe-haven currency for the time being, as CFTC data indicates that investors are adding USD longs while mostly unwinding JPY carry trades. Given the positive trend in US economic data, we suspect FOMC members to be slightly more optimistic on the US recovery and hawkish on inflation. One thing is immediately clear, the US Fed will begin their tightening well before the ECB could even consider hiking rates. Despite the fact that the ECB is firing up the monetary printing presses, inflation remains a low priority in the near term. Pressure will remain on the EUR throughout the week and we'll be looking to short the EURUSD on any rallies. EURCHF is still hovering about the 1.4000 level. Should that level be breached, we doubt the SNB will intervene to curtail a Euro rout - due the SNB's insistence that intervention on the Swiss side will only be executed to restrain CHF deflation & understanding that fighting the market is futile at times. Our final thought on the Eurozone focuses on Estonia. With its rigid adherence to Maastricht, this small Baltic country is still publically committed to joining the EUR next year. However, the optimism for this adoption is beginning to fracture. Traders are questioning the wisdom of expanding the struggling EMU during the current crisis and others suspect Estonia's bid for membership may be withdrawn.