Euro Volatile As Ireland Accepts EU Rescue Package

The first part of this week has been struck by ups and downs in Euro uncertainty which is the dominant factor influencing the broader currency markets. Initially, the announcement that the EU would be providing a rescue package to Ireland after several weeks of speculation pushed the Euro higher, as this ended the uncertainty and revealed the EU as a dominant force able to impose conditions on single-currency nations. As the effects of this became more apparent in Ireland however, the Euro again became vulnerable and experienced some downwards movement as political uncertainty crept into play as there were calls for an early general election in Ireland. This calls further into question whether the actual rescue package could indeed be implemented or whether any new Government may pick the terms of the rescue deal apart. Other European nations are now also under pressure as questions are raised on who might be next in line for rescue funds with Portugal being flagged up as in need. The main champion of all this mixed Euro fortune has as usual been the safe haven currencies – with the US Dollar and Swiss France becoming stronger. Upwardly revised US GDP figures, as well as the trouble in Korea, have also helped push up the US Dollar. In terms of economic growth, the UK has been having a good week so far with the main event being revised GDP figures for the third quarter. The good news is that these were not revised downwards and maintained the level of growth at 0.8 percent (when they initially came out in October the 0.8 percent rate hugely over achieved against the 0.4 percent prediction). Generally speaking, data out of the UK is still strong but looking longer term to a few months ahead, the UK – and Sterling – has the impact of spending cuts and then also the VAT rise in January to deal with. Looking ahead to the rest of the week, there is a UK distributive trade survey on Thursday morning and the German Producer Price Index as well as European Monetary Supply on Friday.