Euro Bid Despite Irish Politics

The Irish political situation got worse on Friday and over the weekend as the ruling coalition fell apart. Firstly we saw Brian Cowen resign as the leader of his Fianna Fail party although stay on as Taioseach and then on Sunday the Greens decided it would be apt for them to quit too, leaving the government without a mandate and putting the passage of a key finance bill in jeopardy, on which the vote is due this week. This kept the euro wobbly on Friday although it has not lasted in Asian trade and the single currency has started to bounce back.

Indeed, data from the Chicago Mercantile Exchange has shown that market participants bought 48bn euros in the seven days to January 18th, reversing the net position on the euro from short, predicting that it was going to fall, to long, they expect it to rise. We believe this is more out of caution than anything with traders worried over a massive policy response to the areas debt problems; something that could see a lot of them caught in the crossfire. The net position long is only small as well and these things do move quickly.

Retail sales from the UK were predictably poor on Friday as Decembers figures were ruined by the weather. Heavy snow led to a logistical nightmare for shoppers and stores alike with stock, employees and customers unable to reach their destination. Retail sales fell by 0.8% vs their -0.2% expectation and puts a strong Q4 GDP release in doubt. The preliminary reading is due tomorrow at 09.30.

Key announcements this week will be the minutes from the Bank of Englands latest meeting and the Feds latest decision both on Wednesday. We also get preliminary Q4 GDP figures from the US on Friday.

Today the focus is on Germany however and given the strong nature of recent German data and its effect on the euro we would expect the single currency to add further gains in todays trade.

Latest exchange rates at time of writing

Rates are dependent on amount transacted.

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Article source: Bing Polictics