In a joint statement Friday, German Chancellor Angela Merkel and French President François Hollande also vowed to defend the euro; 'we are deeply committed to the integrity of the euro zone.'
However, Investors remained cautious as German Economy Minister Philipp Roesler warned the ECB over the weekend about any large-scale government bond purchases.
The French daily Le Monde reports today that the Eurozone governments and the ECB are preparing coordinated action to intervene in financial markets to purchase Spanish and Italian debt. Unnamed sources claimed the ECB was willing to take part on the condition that governments agree to tap the bailout funds. Under the plan, the EFSF would be activated first to purchase Spanish and Italian debt in the primary market, followed by the ESM after it becomes operational.
Also Monday, preliminary data showed that Spain’s gross domestic product fell 0.4% in the second quarter, in line with expectations and following a 0.3% decline in the previous quarter.
Later in the day, U.S. Treasury Secretary Timothy Geithner was to meet with German Finance Minister Wolfgang Schaeuble and Mario Draghi to discuss the global economy.
This week sees the US Fed, ECB and BoE all meeting to discuss policy in the upcoming week and the markets will try to find hints for potential easing measures.
The much anticipated US Non-Farm Payrolls (NFP) and the unemployment rate are also expected this week and they will sure to set the tone in the next half of the week.
EUR/USD the shared currency has dropped to 1.2270 soon after flash Spanish GDP figures for the second quarter showed that the economic activity has contracted by 0.4%. This number is only one of the key numbers that will set the tone in the upcoming week.