“Most observers recognize that the problem is not one of bank balance sheets but rather of the creditworthiness of sovereign government debt.   However, to restore confidence in the government debt of the most indebted nations it is imperative that they return to economic growth, a goal which is being undermined by the budget cuts demanded by their creditors,” the strategist wrote.

“Eventually, having tried everything else, European leaders may approve significant fiscal transfers to achieve this growth,” he said. “However, until then, any agreement is likely to receive a ‘thumbs down’ from markets – clearly a major roadblock for global stock markets this week.”

It will also be a busy week for corporate earnings as 187 companies in the S&P 500 report quarterly results. “Through last Thursday, 71% of firms were beating earnings estimates compared to 22% missing,” Kelly said.

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