Eurozone debt problems persist as the Euro loses ground

There's no smoke without fire as far as the Eurozone's sovereign debt problems are concerned, or at least that's the way the markets will treat the latest batch of rumours that hit the newswires over the weekend.

Ministers in Ireland, and representing peripheral Eurozone countries as a whole, continue to deny that negotiations for a handout from the ECB are taking place but it is increasingly likely that the issues surrounding sovereign debt will have to be tackled sooner rather than later. The problems for the Eurozone is that a bailout or no bailout both carry substantial risks because bailing out Ireland creates a precedent for other states in trouble. If they don't bail out Ireland it would cause contagion effects for Portugal and Spain.

Last week begun with US Fed Chairman Ben Bernanke defending the $600 billion 'QE2' package against criticism from developing countries that it was against the spirit of multilateral cooperation. There was also renewed concerns over Europe's budget troubles, weakening the Euro, while the UK's trade deficit narrowed slightly in September, although a slowdown in manufacturing output in August and disappointing quarterly housing data dampened any positive sentiment. 

The US trade deficit also shrank in September, but China's trade surplus grew to $27 billion in October, and inflation hit a new two-year high of 4.4%, sparking fears that China could increase interest rates again. 

The Australian dollar also came under pressure late last week, suffering losses due to heavy selling of commodities and the possibility of an increase in Chinese interest rates as China's trade surplus increased by 4.4%.

It is a busy week of economic data in the UK this week with the latest unemployment figures, alongside November's Bank of England monetary policy committee minutes on Wednesday. With no change in UK interest rates once again, the minutes may shed some light on the direction of future monetary policy following the budget cuts. 

There is also the latest inflation readings on both sides of the Atlantic, while retail sales are announced in the US on Monday and in the UK on Thursday.