Financial markets are beginning the week in rather a quiet fashion as most regional centres remain on holiday following the new year. The euro is still under pressure however, with the latest IMM positioning report revealing that short bets on the euro are at record highs, and EURJPY dipping to lows of 98.66 - its lowest level since December 2000.
Plenty of pro-Eurozone rhetoric from European leaders has failed to push the currency higher, and scrutiny on the single currency's future is likely to return quickly once the holiday season is out of the way. German Chancellor Angela Merkel was quoted as saying that she would "do everything to strengthen the euro", but added the significant disclaimer that success could only be assured if Europe worked more closely together.
Resuming the flow of negative euro-headlines in 2012, Spain's newly elected government announced that its 2011 deficit is likely to come in at roughly 8% of GDP, well above earlier estimates of around 6%. Fresh austerity measures will be necessary to get finances back on track, but market patience is growing thin waiting for Europe to get its house in order.
Today we expect another session of thin liquidity and low FX participation, with the only economic releases of note being German and Eurozone PMI manufacturing surveys.
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