Ireland Passes Budget In Parliament But Euro Moves Lower

Parliament in Ireland approved the tax increases and budget cuts necessary to ensure the 6 billion Euros 2011 cuts mandatory for the EU and IMF rescue package to be confirmed. The budget, thought of as the most austere in history, was passed by a slim 82 to 77 votes. Three more budget votes are now necessary to finalise proceedings in the coming days with this drawn out process causing funds to leave the single currency with the Euro moving lower. Ireland will have access to an 85 billion Euro rescue package if the process is completed.

Pound Sterling – UK Markets

The Pound has been advancing on the Euro since Tuesday with the Irish budget and ECB meetings keeping sovereign debt in the spotlight. Sterling moved up against the Dollar yesterday helped by better than expected manufacturing data but has seen some movement downwards overnight. As usual, the Dollar may prove that it will be the largest beneficiary of funds moving away from the Euro. In a relatively quiet week for UK data so far, the UK economy will be back high in mindsets tomorrow with the Bank of England interest rate decision coinciding with trade balance figures.

US Dollar – US Markets

News that President Barack Obama has agreed to extend the tax cuts for two years of former President Bush has given the Dollar some strength with the US currency gaining on the Euro. The Dollar has also been gaining on the Pound since the second half of Tuesday also helped by its status as a safe haven - resurging tensions in North and South Korea and funds flowing away from the Euro whilst the Irish situation is resolved have helped maintain the Dollar’s strength.

Euro – European Markets

The Euro has lost some ground as the Irish budget now requires more rounds of voting to become finalised. The first vote on the austerity measures passed the budget with 82 votes to 78. Although this is positive for the Euro, as the downwards pressure would have no doubt been much more significant had the budget failed to get passed, there are still three more voting hurdles to get through so there has been some Euro weakening as markets move funds into other currencies. An International Monetary Fund meeting is set for Friday for their loan to be approved. Whether or not the European Central Bank will increase its bail-out fund reserves continues to hit the news, with the official message being that funds do not need to be increased. Another round of stress tests will be outlined next week. German trade balance data this morning has revealed that the trade surplus has shrinked from 15.4 billion Euros to 14.3 billion in October.

Other Currencies – Highlights

Canada has held interest rates steady at 1 percent for the second time. This suggests that threats are still present to the economy with it not yet thought of as robust enough to withstand another rise in interest rates. The Canadian Dollar fell from near its strongest levels in three weeks following the decision and also after export commodities such as crude oil reversed gains. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.