The British pound has dropped against the Australian dollar as confidence in the Eurozone returns this past week. But how long can the upbeat mood last?

The British pound has dropped against the Australian dollar this past week - in addition to other currencies including the euro - as confidence that Eurozone politicians can find a solution to the debt crisis increases.

This past weekend French and German premiers Nicholas Sarkozy and Angela Merkel pledged at a meeting in Berlin that - prior to a planned meeting of the G20 at Cannes on November 3^rd - a solution to the debt crisis would be unveiled. The pair did not announce details of the plan but this nonetheless proved enough to boost confidence - raising the euro and other currencies including the Australian dollar against sterling.

Impact on the foreign exchange market:

Of course the obvious question regarding this pledge is whether Merkel can follow through. To date Eurozone leaders have been slow (at best!) to respond to the debt crisis - meaning it should be interesting to see what they propose! Nothing less than a magic bullet could send confidence in the euro tumbling again - once more prompting the euro and Australian dollar to decline.

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