Who can save the euro?

lower probably around 1,25 to the dollar as we have seen the single currency touch 1,2990 against the dollar last week. Technical analysts are saying the euro could touch 1,20 or even lower if this debt crisis continues on without a real solution. The single currency is vulnerable as we have seen it reacting to any headline news and has come under so much pressure ahead of the EU ministers telephone conversation on a bailout package.

At the moment we are seeing a crisis of confidence as Fitch ratings may downgrade France and six other eurozone countries piling pressure on the euro. The recent EU summit held on December 9 failed to yield any results, as investors believe that the EU fiscal union pact was a disappointment and failed to meet both market and ECB expectations weighing down on the euro.
On December 19, we saw ECB president Mario Draghi address the European Parliament and warned that a substantial risk could really damage the euro. Draghi in his speech rejected that the ECB will not go

ahead with any quantitative easing programme saying that it could damage the ECB credibility. The problem with European politicians is that they believe austerity measures alone can get the eurozone on track, yet the fiscal and monetary issues also need to be addressed.

The euro rose to trade at US$1,3067 but erased all its gains to trade at US$1,3012 against the dollar on the backdrop that another downgrading is on the cards. The euro weakened against the yen to trade at 101,27 yen, as further eurozone news seems to damage sentiment across the board. The dollar strengthened against the yen as we saw a massive sell-off in Asian trade after the death of the North Korean leader Kim Yung Il. Asian markets were rattled by such news leaving investors to run for cover as uncertainty gripped the Asian markets over the future of North Korea politically and economically.

The dollar was trading at 77,98 from 77,89 against the yen as safe haven issues pushed investors and traders to accumulate in the dollar. The Swiss franc also strengthened on geopolitical issues affecting the Asian markets as it regained its safe haven appeal against its major trading peers. Since intervention by the Swiss National Bank to stem any gains in their currency by selling their currency in September the Swiss franc gained against the euro to trade at 1,2187 per euro from 1,2215. The Swiss franc reversed earlier losses against the dollar to trade at 93,87 US cents from 94,32 US cents. The Swiss franc seems to do well in times of financial turmoil and because of its political and economical stability it pushed investors to buy into the currency coming from Asia. In London, the EU leaders have requested the UK government to contribute US$40,9 billion as bailout to help save the eurozone.

The pound reversed earlier losses to the dollar as it traded at US$1,5532 and strengthened against the euro to trade at 83,93 pence per euro. If the bailout package goes ahead we could see a short euro rally against the pound and please watch the currency pair. The euro earlier rose against the pound to 84,07 pence per euro but uncertainty gripped investors across the board on downgrading issues and saw it retreat to 83,93 pence per euro. In the South Pacific the Australian dollar weakened on downgrading issues and that big sell-off in Asian trade leaving risk appetite low and a flight to safety for investors.

The Aussie dollar weakened to 99,43 US cents from 99,87 US cents and fell against the yen due to that big sell-off to trade at 77,96 yen. Asian sell-off dealt a big blow for the South Pacific currency as it traded between ranges of 99,40 and 99,45 US cents for the most part of the day.
African Markets

The Fitch ratings that it may downgrade France and six other nations in the eurozone left risk appetite to under perform. That pushed investors to reduce their net long positions in the South African bond market. A flight to safety left the rand reeling as a jittery market further weakened the rand to trade at 8,3907 against the dollar. The rand had earlier strengthened against the dollar to trade at 8,3429 to the dollar in earlier trade but reversed those gains to trade at 8,3907. A no stimulus approach by the US and Europe could dry liquidity and that could push the rand into the nines regions.
Commodity Markets

The plight of Europe is the biggest risk for commodities together with a Chinese slowdown. At the moment the demand outlook for commodities has been dampened by bearish data across the board. Gold had touched US$1 600 an ounce earlier but failed to hold onto those gains and fell to US$1 593,20 an ounce.
At the moment we are seeing gold in a liquidating phase as governments and investors sell gold to hold dollars as collateral to patch up their balance sheets. Another driver of liquidity drying up could drive gold to the downside which could fall below US$1 500 an ounce.

Crude oil is trading at US$93,17 per barrel as a strong rally earlier saw it touch US$94,07 per barrel but fell to US$93,17 per barrel.