Euro under huge pressure as Irish resist EU push to accept bailout

US Dollar:

Monday has seen investors take a cautious stance ahead of more developments on the Irish debt situation, and a volatile session is possible depending on the Irish debt story. The dollar is higher against the euro, yen and pound as risk aversion comes back into play, boosting the lower yield currency and pushing in-vestors into the safe haven greenback. The US stock market will try to reclaim its footing this week after a shel-lacking that brought the Dow Jones Industrial Average back to its lower level since the midterm elections. The recent resurgence of the sovereign debt situation in Europe coming back into play has certainly been back on the front burner, and the situation in China, those are the two biggest drivers. Markets are concerned that China could take steps to brake its economy’s expansion.
Data 12.30: Core Retail Sales m/m 0.4% unchanged & Retail Sales m/m 0.7% from 0.6%.



Pound:

Sterling , now little changed against the euro and dollar, is pegged to trade in narrow ranges Monday, with coun¬tervailing factors at work while the Irish issue festers. Last weeks gains against the euro saw the pound hit a seven week high of 1.1832 as the worries on the debt issues surrounding certain European countries continue to weigh on the single currency. Cable also faired well as GBP/USD continued to trade over the $1.60 handle, although we have seen some safe haven movements in currency markets this morning. Data wise, this morning we have seen UK house prices post a fall in November, more than reversing the sharp pickup reported a month earlier as competition among sellers to attract one of the dwindling number of new buyers weigh on prices, web¬site Rightmove showed. Despite this data, sterling has kept up its charge on the euro as the debt worries in Ire¬land and Portugal outweigh all other financial stories at present. No major data

Euro:

Irelands funding dilemma looms large Monday with stock markets likely to edge lower at the start, pend-ing more news on this sticky issue of peripheral sovereign debt. The euro did find some support by speculation of an Irish bailout package, as did Greece when its stared into the abyss. When the Greeks accepted hard medicine, and said they were going to be supported and the mechanism comes into play, the market couldn’t hammer them any longer. European leaders over the weekend urged Ireland to accept a bailout from the Euro¬pean Union’s €500 billion emergency-loan facility, to help restore confidence in financial markets and avert a spread of worries to other eurozone members, even as Ireland denied it needed assistance. The news helped to bolster the euro against the yen, but eurozone debt issues have room to play. It seems once Ireland is out of the way the market will be flipping its attention to Spain or Portugal next. The most recent antics on the sovereign debt restructuring mechanism are a breathtaking mixture of suicidal irresponsibility and facial incoherence, and risk inflicting lasting damage to the recovery prospects of the most troubled peripheral countries and to the cred¬itability of the eurozones economic governance framework. Another story hitting the wires came as Portuguese foreign minister has warned that the country may be forced to exit the euro currency if its governments austerity measures are not passed by parliament. Portugal may confront a scenario of exit from the eurozone if it fails to tackle its economic challenges. Portugal saw a sharp loss of investor confidence in the past few weeks as con¬cerns over fellow eurozone weakling Ireland intensified over the Budget, pushing Portugal's risk premiums to their highest levels since it adopted the euro. Data 09.00 E/Zone Trade Balance 1.3B from –1.4B.

General:

• Oil futures crossed $85 Monday as traders snapped up crude oil following a plunge in prices Friday.

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