Housing continues to weigh on GDP

Pound:
Sterling approached a 10-month high against the euro yesterday when worries about possible downgrades of euro zone countries knocked the single currency. The pound slipped against the dollar in early trade after news of the death of North Korean leader Kim Jong-il raised concerns about political instability in the Korean Peninsula, but solid demand from a UK bank in London trade prompted a recovery in the UK currency. Sterling gained 0.2 percent on the day to a session high of 1.1933. A fall below 1.1945 would take the single currency to its weakest since February. Against the dollar, sterling edged up 0.1 percent to $1.5535, recovering from the day's low of $1.5465.
No major data due today.

Euro:
The euro traded 0.5 percent from an 11-month low before Spain sells securities and the release of a German report forecast to show deteriorating business confidence in Europe’s largest economy. The 17-nation euro maintained yesterday’s drop versus the dollar amid signs Europe may have difficulty attracting outside funds to address its debt crisis. The euro is currently trading around the $1.3000 level, where is spent most of the day yesterday. Spain is due to auction three- and six-month securities today. Fitch Ratings lowered its outlook on France to “negative” on Dec. 16 and also put Spain and Italy on review for a reduction.
Data 09.00: German Ifo Business Climate.

Dollar:
The USD caught a bid following the death of North Korean dictator Kim Jong II and news of increased tensions on the Korean Peninsula. Yesterday's building permits and housing starts are forecast to be flat which underscores the slow recovery in the US housing market. Tomorrow's existing home sales will also shed some light on a sector that has been a drag on US GDP. The USD may lose its recent appeal should we have better than expected hosing data which would contribute to an improved risk sentiment. Liquidity is beginning to tighten as the Christmas holiday approaches with short term moves running a bit further. While the major FX pairs remain trading within their recent ranges, reduced liquidity has the possibility of triggering stops for those traders who look use tight protective stops.
Data 13.30: Building Permits.

General:
• Canada’s dollar swung between gains and losses versus its U.S. counterpart as crude oil and stocks reversed earlier advances, muddying the outlook for currencies tied to growth. The Canadian currency fluctuated after falling 2.1 percent last week, the most in five days since Nov. 4, on speculation European leaders are failing to contain the region’s debt crisis.