Dollar advances before German investor confidence data

Pound:
Sterling pared gains against the dollar on Friday, retreating from a session high hit on speculation of a Chinese investment vehicle providing funding to euro zone countries, as risk sentiment wavered following a European summit. The pound tracked moves in the euro during a choppy session, reflecting uncertainty over the outcome of an EU summit that did little to impress markets overnight. Sterling was trading weaker this morning at $1.5570. It retreated from a session peak of $1.5735 reached after a source said China planned to create a $300 billion foreign exchange vehicle, part of which would be focused on Europe. Against the euro, sterling stayed within sight of a one-month high. The pound has been benefitting from investors seeking euro alternatives due to the region's debt crisis.Some traders and analysts said it may struggle to advance short-term, however, particularly if sentiment towards the euro improves, with strong support for the euro seen around 85 pence.
Data Tentative: BOE Gov King Speaks.

Euro:
Last week's EU summit went a long way towards forging the closer economic ties needed to prevent future debt crises but markets are likely to judge it as too little and too late to solve the current one. As on previous occasions, the measures are unlikely to calm investors for long. European Union (EU) leaders ended the summit with a historic agreement to draft a new treaty for deeper integration in the euro zone, but analysts and policymakers remained sceptical such long-term steps could solve the crisis that has shaken Europe for two years. While German Chancellor Angela Merkel said she didn't expect leaders would meet again before Christmas, a senior EU official said he thought market pressure would compel them to meet in a room together again sooner rather than later. The euro slipped early this morning, safe haven German government bond futures rose and European stock futures were pointing lower, though none of the moves were dramatic. EU leaders agreed to lend up to 200 billion euros to the International Monetary Fund to help it aid euro zone strugglers, and to bring forward the permanent rescue fund European Stability Mechanism (ESM) by a year to mid-2012.
No major data due today.

Dollar:
The dollar gained against most of its major counterparts with investors citing risk aversion as the main factor, boosting demand for safer assets. This comes after the EU failed to impress with their IMF plan after Friday's marathon agreements between EU nations in early trading. The dollar advanaced from Friday's low of 1.3431 to currently trade at 1.3300 against the euro. Against sterling the dollar has strengthened from Friday to currently trade at around the 1.5560 level.
No major data due today.

General:
•    The Australian dollar was higher Monday after euro-zone policy makers moved Friday a few steps closer to finding a way out of the region's crippling debt crisis. The currency pulled back from its opening highs as analysts said more information is needed on the implementation of the European Union's drive toward greater budgetary unity and its efforts to beef up the European Stability Fund.

 
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