Euro Under Pressure As Portuguese Budget In Spotlight

Following yesterday's rise, the Euro has been falling so far today as mounting European debt issues are high in the minds of markets. Today sees a final vote in Portugal on the 2011 spending plan and deficit cutting measures – with rumours of mounting pressure on Portugal to accept a similar rescue package as Ireland. In addition, Chancellor Merkel and President Sarkozy have jointly called for the creation of a permanent fund to provide bailout assistance for Eurozone states when the current facility expires in 2013.

Pound Sterling – UK Markets

The Pound closed at €1.1814 against the single currency, falling by 0.3% over the course of the day but overall movement since last night has seen the Pound gain back ground. Sterling weakened further against the Dollar to close at $1.5738. Bank of England policy members have received press scrutiny today. Governor of the Bank of England, Mervyn King, has been criticised by a member of the bank's Monetary Policy Committee (MPC), Adam Posen, for comments he made in May in support of the government’s austerity budget as being too political, it has emerged. The MPC has always restricted itself to monetary matters and not commented on fiscal policy. A minority of MPC members believed that Mr King had crossed the line when endorsing the chancellor’s view that there was an immediate need for spending cuts.

US Dollar – US Markets

The Dollar ended the day slightly lower against the Euro at $1.3321, shedding 0.1% but has been generally rising against the single currency so far today as the US markets continue being quiet with the US Thanksgiving holiday. Today is "Black Friday" in the USA when consumers set the mark for spending over the festive season. Prices are cut following the Thanksgiving holiday in a bid to encourage shoppers to part with their cash. With US consumer spending higher than expected, figures from today's activities will be keenly scrutinised for evidence that consumer confidence is genuinely rising.

Euro – European Markets

The Euro arrested its fall against Sterling, the Dollar and the Yen yesterday on news of increased business confidence in Germany, but fresh sovereign debt worries are sending it lower in early trading today. The final vote on the Portuguese 2011 spending plan takes place today, in a week that has seen European debt back at the top of the agenda. Other than the rumoured mounting pressure on Portugal to consider a rescue package, there remains real concern about Ireland with questions being asked regarding whether the Irish Government with a very slender majority could actually adhere to a new budget if its is passed on 7th December. This contrasts with the Euro's strongest economy. German economic minister, Rainer Bruederle, has suggested that Germany is on its way to full employment and that domestic demand, investment and consumer confidence are all improving. German unemployment stands at 3 million, but is down from a peak of 5 million. Q3 economic performance was 0.7% in Germany which compares favourably to the Eurozone average growth of 0.4% for the quarter.

Other Currencies – Highlights

The Canadian Dollar is near a seven month high against the US Dollar as speculation mounts that Canadian interest rates will rise sooner than anticipated following strongly performing inflation and retail figures, alongside Russia adding the currency to their national reserves. The governor of the central bank of Iceland, Mar Gudmandsson, has given his support to the beleaguered Euro, suggesting that joining the currency could be in the national interest. Mr Gudmandsson blamed the current Euro weakness on failures in banking regulation and national debt problems rather than any fundamental problem with the Euro itself. Iceland has entered into negotiations with the EU over joining the block.