Ireland’s unpredictability the headline of the currency market

Ireland continues to be at the forefront of foreign currency exchange market volatility with Irish Prime Minister Brian Cowen playing a game of political brinkmanship with his political opponents, and possibly his country's fiscal sovereignty.

Demands by the Irish Green party, a junior partner in the coalition, for a general election, in the face of mounting tension within the country, has thrown into doubt whether a new budget will even be passed on December 7th.

Cowen's response was to agree to their request for an election, but only on the condition that the austerity budget was passed and the new four year fiscal plan was implemented into law in return for the bailout money. This new uncertainty raises the stakes as it raises the prospect of a new government attempting to unpick the terms of any bailout package agreed.

In amongst all this political division and uncertainty, as well as lack of detail with respect to the bailout package, the credit ratings agency Moody's has announced that it is reconsidering its credit rating outlook on Ireland wasn't much of a surprise given the circumstances.

In the current tense political climate within Ireland, the uncertainty looks set to continue for a good while yet. Meanwhile we have Portugal insisting that they don't need a bailout in the same manner as Greece and the Irish before them, which suggests that eventually they probably will need one. As a result the Euro has continued to slide while the US Dollar has rallied.

Data out today includes the first revision of US Q3 GDP which is expected to come in at 2.4%, up from the previous 2% print, however the markets main focus will be on the core personal consumption expenditure figure which is expected to be unchanged at 0.8%. If this figure remains at its current low level it gives the monetary doves all the justification they need with respect to the Fed's recent decision to continue to stimulate the economy.