Morning Currency Wrap for Monday January 10, 2011

Portugal Under Pressure To Accept Bailout  - The Euro fell towards four-month lows against the USD as worries about Europe's mounting debt continues, this time with Portugal under attack. Every news report I read says that Portugal is being pressured to accept and EU/IMF. We can substitute Portugal for any other country because it's the same MO. No matter what the country, it always comes down to the country resisting and the rest of the European Union and the IMF applying pressure - Why is that? Well the countries in the EU want to prevent the debt crisis from spreading to their country and the country in trouble doesn't want to sign on to debt servitude to the EU/IMF. For those that think the current bailout fund will be to small comes news that Steffen Seibert, Chancellor Angela Merkel’s chief spokesman, declined to repeat the nation’s objections to restocking the fund fanning speculation that Germany may soften its opposition to expanding the region’s bailout fund. This should be an interesting week for the Euro as Portugal, Spain and Italy are all due to tap the bond market for funds this week. In the U.S., Friday's worse than expected jobs data in the U.S. only reinforced that the Fed would not be in a hurry to wind down its QE2 program of buying assets to stimulate the economy, despite recent upbeat data that pointed to a more self-sustaining recovery. In Asia, the AUD continues to be hindered by the economic impact of the massive flooding in Queensland. Queensland Roads Minister Craig Wallace said today that damage to the state’s transport network stands at around A$1.5 billion. Meanwhile, China’s customs bureau said today its trade surplus was $13.1 billion in December, less than the $20.8 billion forecasted as China's imports continue to grow. In Canada, the CAD was weaker but still held above parity against the USD as commodity prices remained soft. Friday's better than expect jobs report in Canada fueled speculation that the Bank of Canada would raise interest rates sooner rather than later, but only time will tell.