Japan Offers to Help Europe

After the crash and bang of last week's market as everyone tried to
position themselves for the upcoming market and prices moved multiple
percent in a day yesterday seemed a tad soporific with prices
remaining very much range bound.

The focus was still on the Eurozone and the insurance cost against
default of some of its weaker members with Belgium, Greece and
Portugal's continuing to rise. The euro has managed a slight show of
strength after Japan pledged overnight to invest in euro area bonds in
order to bulk up the European Financial Stability Fund. This is
exactly what China promised to do last week and although it may
provide a few hours of respite for the single currency this is no
panacea.

Yields have also been on the increase and we get our first euro debt
auction of the week, in this case, from Italy. While Italian yields
have risen in recent months it has not been too pernicious however we
will be looking to see whether we are seeing further contagion into
stronger economies. Portugal and Spain step up tomorrow.

The pound has enjoyed a corking start to the new year but yesterday
was pushed back by its old nemesis; the housing market. The Halifax
building society reported that house prices fell in the month of
December by 1.3% vs. a 0.4% expectation. Things are looking very poor
in the housing market and this will continue to act like a weight
around the pound's neck.

Once again the market is expected to be quiet today with the data
calendar light although the powder keg of Europe may explode at
anytime.

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Source: Fxstreet.com