The euro edged up versus the US dollar this morning with risk appetite underpinned by better US economic data and comments by ECB member Lorenzo Bini Smaghi.
However it remained under pressure as the eurozone remained plagued by uncertainty surrounding its debt crisis. A drop in US weekly jobless claims to its lowest since April 2008 as well as an improvement in US consumer sentiment in December boosted risk appetite. However, despite recent data indicating the US economy is strengthening, media reports suggested that the Federal Reserve could commit to keeping rates near zero through to 2014. Meanwhile, adding some further support to the single currency were remarks made from departing ECB member Mr Smaghi, who said that the ECB was able to scale up its actions if needed, and that quantitative easing could be an option.
With the threat of sovereign downgrades throughout the eurozone lingering over the euro, sentiment towards the currency will probably continue to remain bearish heading into the New Year.