Euro slips as sovereign debt fears continue

Tom Tong21/Dec/2010Currency Updates

GBP

UK consumer confidence remained at a depressed level heading into the Christmas shopping season, a fresh survey revealed on Tuesday.

The GfK NOP indicator of UK consumer confidence was unchanged at -21 in December, compared to expectations for a score of -22.

A fall in the index was prevented by the climate for major purchases sub-index, which fell to -7 from -17 in November, as the run up to Christmas and the imminent VAT increase in January rose shoppers’ appetite for so-called “big-ticket” items.

All other components of the index fell in December, and GfK NOP said without the boost in the gauge for major purchases, consumer sentiment would have fallen to its lowest level in one year.

USD

The dollar continued to strengthen against the euro on Monday, even as European officials dismissed speculation that the monetary union may split due to stresses caused by competitiveness gaps within the EU. With little first-tier economic data from the United States to consider during the week leading up to Christmas, focus remained on developments across the Atlantic.

EUR

The euro remained on the defensive versus other major currencies on Monday, slipping to a fresh record low against the safe haven Swiss franc amid continued concerns about European sovereign debt problems.

European Central Bank President Jean-Claude Trichet continued his strong defence of the monetary union, telling a French radio station that a breakup of the Eurozone is an “absurd hypothesis.” Trichet urged governments to adopt fiscally responsible budgets, and said that Ireland should push ahead with its sweeping austerity measures.

Spending cuts are likely to hamper short-term growth in Spain Ireland, and Greece, but most view austerity measures as a necessary condition for long-term economic health.

Credit rating agency Moody’s said on Monday it may cut the ratings on Spanish banks following its multi-notch downgrade of Ireland’s credit rating last week. Speculation has risen that France and Belgium may also face cuts.

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Written by Tom Tong

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