EUR/US$

The G7 meetings failed to announce any new significant policy measures over the weekend with more general comments on the need to tackle the severe downturn. Despite a promise to resist any moves towards protectionism, the lack of policy initiatives had some impact in weakening the Euro in Asian trading on Monday.

The Euro was also unsettled to some extent by fresh rumours of difficulties in Eastern Europe and a possible downgrading of Ukraine's debt rating while there was also some speculation over an Irish sovereign debt default. The internal Euro-zone stresses were illustrated by a further widening of yield spreads between Germany and the weaker Euro-zone members.
The comments from ECB Chairman Trchet were in line with recent remarks and markets remain confident that the bank will lower interest rates at the March meeting with expectations of a 0.50% reduction.

The Euro dipped towards important technical support levels and two-month lows just above to 1.27 in Europe before a slight recovery.
Trading conditions were subdued later in the session with US markets closed for holiday. The Euro was fragile on the crosses and consolidated around 1.2780 as liquidity weakened. Activity in US trading on Tuesday should be more substantial with some important US releases including data on capital flows and net outflows would tend to weaken the dollar.

sources http://traderplanet.com