The euro has started the week on the back foot versus other majors as it continues to be undermined by sovereign associated risks. EU discussions continue at intergovernmental level but markets remain concerned about the lack of near term progress in resolving the region’s debt crisis, potential sovereign downgrades and the likelihood that the eurozone is back into recession. Short covering ahead of year end could provide some support for the euro but at the same time sentiment appears to be increasingly moving against it.

Eurozone finance ministers are expected to hold discussions over the phone today to talk about their next steps to stem the debt crisis. The Daily Telegraph is reporting that ministers will ask the UK to contribute €30.9 billion toward an IMF package aimed at rescuing the euro. If the UK agrees, it would be the second biggest contributor behind Germany and level with France. However, UK PM Cameron has repeatedly promised not to directly fund a bailout package.

Looking vulnerable around the $1.30 level versus the dollar, the euro has also started the week below the Stg0.84p level versus sterling. Meanwhile, as well as concerns about Europe markets were also unnerved by the news of the sudden death of North Korean leader Kim Jong-il, sparking concerns about stability in the region and who will now be in charge of the state and its nuclear programme. It is expected that he will be succeeded by his son. In other news overnight, Righmove reported that asking prices for UK house fell 2.7% over the month of December but were still up 1.5% in year-on-year terms. There are no other data of note today, leaving the focus once again on EU discussions.