The euro eased back from an eight-week high propelled by bearish
investors closing out huge short bets against a systemic breakdown
across the Eurozone. Over the weekend the Irish Prime Minister
announced he'd soon throw in the towel amid deepening unpopularity
across the nation leaving the fate of the budget in jeopardy. Last
year's €85 billion promise of financial assistance to Ireland from
fellow members requires the safe passage as a prequalification of aid.
Elsewhere the underlying theme of global recovery continues to
dominate the fate of the dollar and yen.
*U.S. Dollar* - Dealers bought the dollar on Monday ahead of key data
reports due later in the week likely to show signs of further economic
growth and rising confidence amongst consumers. The dollar index is
currently off its best levels of the day but is higher by 0.2% at
78.27. It's a busy data-week for the U.S. with the FOMC meeting but
unlikely to alter monetary or its quantitative policy. President Obama
delivers his State of the Union address on Tuesday and will emphasis
the need to accentuate the competitiveness of the U.S. position and
will also develop the plan to reduce unemployment and cut the
escalating government deficit.
*Euro -* Over the last two or three weeks speculators have scaled back
massive bets against the fortunes of the euro in the currency futures
market. Latest open interest data shows that a net short position of
some 111,000 contracts has been eliminated now leaving the market
marginally long. Such a move in the face of growing confidence that
the euro is unlikely to shatter amidst strengthening resolve to shore
up regional finances has created a groundswell of pessimism amongst
those most bearish on the euro resulting in a six-cent upswing in its
fortunes in just three weeks. The euro reached its highest since
November 22 as the bears licked their wounds and today buys $1.3598. A
PMI composite survey for January improved to 56.3 from 55.5 although
within the data the manufacturing index lost its momentum and pulled
back. An index of service sector performance did continue to expand.
Region-wide data mirrored the performance of Germany, the largest
economy in the Eurozone.
*Aussie dollar -* Overnight losses for the Aussie have subsequently
reversed in early North American trading with the unit surging to
99.20 U.S. cents and well off a session low at 98.64 cents. Treasurer
Wayne Swan noted over the weekend the "enormous" economic impact from
the flooding that hit the Queensland territories. The flooding puts
any central bank ambitions to raise monetary policy on hold and as
such reduces the appeal of the Aussie dollar. Data released overnight
shows prices paid to producers in December rose at the lowest rate in
12 months for a 0.1% gain compared to a forecast reading of 0.5%.
*Canadian dollar -* As with the Aussie the Canadian dollar is fighting
back against an earlier bout of U.S. dollar strength that saw the
Canadian unit slip to $1.0018. It has subsequently recovered to stand
at $1.0055.
*Japanese yen* - As regional stocks broadly rise the Japanese yen lost
a few fans with demand for riskier asset classes on the rise. The yen
weakened after the release of a position paper from the government in
which it explained again its vigilance against a rising currency. The
paper noted that the government would continue to act if necessary
against unwarranted currency strength, which it said causes economic
strain and financial market stress if left unchecked. The government
remains prepared to "take bold action when necessary" according to the
report. The yen eased per dollar to stand at ¥82.75.
*British pound -* The British pound is weaker ahead of a report
scheduled for later in the week likely to show the economy lost some
of its recent momentum in the fourth quarter. The pound looks to be
challenged by the height of the hurdle at $1.6000 against the dollar
where it has recently tested reaching lower peaks on subsequent
occasions. The pound also lost ground per euro, which today buys 85.30
pence.
Source: ActionForex.Com
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