Cameron flounders at EU budget talks

Negotiations are grinding to a halt for David Cameron as he attempts to secure a freeze in the EU budget. A north-south divide, just for a change, has emerged with the UK, Germany, the Netherlands and Sweden wanting a frozen or lower budget battling France, Italy and Spain who are pushing for increases. The real story seems to be Germany and France sitting on different sides of the fence which you would think would translate into euro weakness in the foreign exchange markets, but you would be wrong. EUR/USD has just broken 1.29 and looks set to push higher in low volume markets with the US still effectively closed.

The move looks more like a temporary short squeeze given EU data this week was also poor, so euro sellers should probably look to take advantage of the move over the next few days. German IFO business climate data was slightly better than forecast this morning, but on its own cannot explain the momentum behind the euro. German Q3 came in exactly on estimates.

Looking forward to next week the key data comes from the US where we get early estimates of retailer's results from Black Friday, durable goods orders and consumer confidence. The effects of Hurricane Sandy will begin to enter the numbers but the market is unsure as to how large an effect this will have a national level.