The Euro has given back most of its gains during yesterday afternoon and Asian trade overnight after what could’ve been the briefest relief rally on record. The Irish government went cap in hand to their fellow European partners and asked for Billions in additional funding. The perception in the foreign exchange markets is that a possible contagion to other highly indebted euro zone states is likely in the medium term.
The euro’s fall coincided with a rise in the premium investors demand to hold Irish government bonds rather than benchmark German debt, reversing an earlier fall, after the country’s junior coalition party called for fresh elections.
The call by Ireland’s Green Party for a January election raised fresh political uncertainty over the country’s outlook and again spurred trades to drop their Euro holdings.
The euro’s fall accelerated after an Irish independent government lawmaker said he was unlikely to support the country’s 2011 budget. This kind of in country squabbling will certainly hurt chances of a near term Euro revival.