Sterling holds onto gains made Friday against majors

US Dollar:

The dollar has started the week off mixed after last weeks slump on the back of a weaker than ex-pected nonfarm payrolls number. Asian equity markets are mixed overnight with concerns over a slowdown in China’s economy. Their Dec trade surplus saw an 8 month low at $13.1B while export growth was at its lowest level; since early 2010 at 17.9% – below expectations and a much stronger figure in the prior month. This has led to pressure on the dollar, but the greenback did manage to stop Friday’s rampant decline against the pound. Over a cent was given up against sterling as we saw GBP/USD roar through the $1.55 handle. A slightly differ¬ent picture was painted in EUR/USD, as a falling euro masked the greenbacks losses. The buck took another cent off the under-fire single currency, with the $1.29 handle being broken through in Monday morning trade.
Data: Treasury Currency Report

Pound

The pound posted a near four month high against the euro this morning, building on Fridays gains which saw GBP/EUR brake through the 1.20 handle, hitting 1.2050 this morning. Last week’s UK manufactur-ing data kicked the pound off on a high, but the ever weakening single currency was the main catalyst. The single currencies problems seem to be going form bad to worse, as Portugal now comes into traders sights as the possible next country to have to take a EU bailout. This helped GBP/EUR and the ongoing story looks set to support sterling in this currency cross. Against the dollar we also saw the pound trade higher on Friday, as US jobs numbers disappointed which helped cable take over a cent off the greenback. We have seen the pound trade slightly lower in the last hour of trading as Halifax housing data was released to disappoint the market. The number came in at a lower than expected –1.3% from the expected figure of –0.3%. This has seen cable fall slightly from $1.5567 down to $1.55. GBP/EUR also saw a slight fall from 1.2062 to currently trade at 1.2020. Data 12.01: BRC Retail Sales Monitor m/m

Euro:

This week has continued with last weeks theme of euro weakness as the weekend story of Portugal fac-ing an €80bn EU bail-out hit the euros value hard. Portugal will come under pressure this week to accept a multi-billion euro bail-out from the European Union and International Monetary Fund. France and Germany are said to be anxious for it to seek help “sooner rather than later” to prevent a renewed eurozone crises. Ireland was forced to accept similar financial help last year after several weeks of resisting pressure from fellow EU mem¬bers. International investors are concerned about Portugal's debts and the EU is worried that the crises may soon spread to Spain. On Wednesday, Portugal will attempt to raise money on the international bond markets and this may prove the catalysts for talks over a bail-out. Yesterday, it was reported that preliminary private dis¬cussions had already been held. Ireland issued similar denials before accepting an international loan and a sen¬ior eurozone source said yesterday: “France and Germany have indicated in the context of the eurogroup that Portugal should apply for help sooner rather than later.” There are fears that the crises will spread to |Spain, which has an economy twice the size of Portugal, Greece and Ireland combined.
Data 09.30: E/Zone Sentix Investor Confidence 11.9 from 9.7. Speaker 12.00: ECB President Trichet

General:

• A small oil leak at a pumping station has shut down the trans Alaska Pipeline System, which could lead to higher oil and gasoline prices in the short term and deliver a low to the reputation and fortunes of the British oil giant BP.

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