Irish Budget Day Makes Euro Vulnerable

Details of the Irish austerity budget are set to be revealed later today, with 6 billion Euros worth of internal cuts required in order for Ireland to receive the pledged 85 billion Euros worth of rescue funds from the European Union and International Monetary fund. The Euro has moved down against the Pound since yesterday and is likely to remain under pressure should there be any problems with the Irish budget being passed in Government, with the slim majority of the coalition being a concern.

Pound Sterling – UK Markets

The Pound has moved up against the both the Euro and the US Dollar since yesterday with the European finance meeting and pending Irish budget dampening risk appetite. This morning’s data was mixed with both industrial and manufacturing production figures expected to show growth of 0.3 percent for the month of October. Although industrial production failed to achieve this level, instead dropping by – 0.2 percent, the manufacturing data came in strongly at 0.6 percent. This coincides with the recent sentiment that the manufacturing sector may be the ‘unsung hero’ of the UK economy, helping to pull the UK out of recession as demand increases from overseas. The UK will come under more intense scrutiny as the week progresses with the Bank of England interest rate decision and trade balance figures due on Thursday.

US Dollar – US Markets

The US Dollar moved up on the Euro in the second half of Monday but is now seeing general downwards movement so far today. Although the Dollar is likely to benefit should the Euro uncertainty increase this week, last week’s surprise poor unemployment levels have left their scar. The currency was helped slightly by Obama’s decision to extend the Bush tax cuts which saw a rebound on US treasury yields. More data is due at the end of this week however which could be damaging should it disappoint with jobless data on Thursday as well as the trade balance figures and monthly budget statement on Friday.

Euro – European Markets

The Euro has lost ground against the Pound as several factors collide to bring some anxiety today. Finance Ministers decided in Belgium that financial safety net funds were sufficient, but tensions were highlighted prior to toady’s Irish budget. The Eurozone meeting resulted in an announcement that there was no need to increase the back-up of rescue funds at present. Disagreements are rife however with Germany, Holland and Austria thought to be refusing to increase the size of the bail out fund whilst smaller members called for an increase. Ireland is set to vote on its austerity budget today with some more MPs now saying that they will be supporting the budget despite reservations. Six billion Euros worth of cuts are necessary for Ireland to secure the 85 billion Euro rescue package. Should the budget not be passed, the Euro would be very likely to suffer downwards pressure.

Other Currencies – Highlights

The Reserve Bank of Australia left interest rates unchanged at 4.75 percent suggesting that inflation will remain unchanged in the near future. The Canadian Dollar has dropped from its highest level in three weeks against the US Dollar before the Canadian interest rate decision today. The currency suffered at the start of the month when it emerged that fewer jobs had been added compared to expectations. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.