After falling to fresh one month lows of $1.3423, the euro has recouped some of the losses seen versus the dollar and yen yesterday with players reported to be taking profits on recent moves. However, as the threat of contagion in the euro zone continues to build many are concerned at how long the single currency can remain resilient to the region’s sovereign debt problems. Though the problems may not be confined to the euro zone with Fitch yesterday warning of the exposure of US banks to European debt, which it described as “manageable but not without financial costs”. There was some comfort in the news that the new Greek government won a confidence vote in parliament yesterday, which will hopefully mark an end to political turmoil there. Today there will be close attention paid to bond auctions in France and Spain, which will be a good gauge of market sentiment.

Sterling hit a four week low versus the dollar yesterday, dragged down by poor risk appetite, as well as a dovish Inflation Report from the Bank of England and October’s poor UK employment numbers. It has since recovered from its lows but remains vulnerable on fears that the UK economy could slip back into recession. The BoE now expects the economy to grow by no more than 1% next year and that inflation will eventually fall well below target. Meanwhile, the unemployment rate is at a 15 year high, which will weigh on already struggling households. Trading versus the euro continues to be choppy in the Stg0.855 territory as markets worry about the euro zone’s sovereign debt crisis. Following on from data last night showing UK consumer confidence at record low levels, today sees the release of UK retail sales for last month with the report likely to reflect the weakness of household consumption. Opportunity