LONDON: The euro bounced back from two-year lows against a slightly weaker dollar on Monday, with Greece's presidential election and a batch of U.S. data on Tuesday the chief risks to a calmer holiday mood.
Norway's crown, whose moves have been exaggerated in the past month by its sensitivity to shifts in oil prices, was the biggest faller, down around 1 percent as Brent and U.S. crude gave back overnight gains.
The outlook into 2015 for the euro looks weak, with Luc Coene the latest European Central Bank policymaker to point the way towards outright buying of government bonds to stimulate a still moribund euro zone economy.
Crossing that Rubicon -- effectively funding government deficits with newly-printed money -- is expected to test the bottom end of a range in which the euro has held for more than a decade against the dollar.
"It's going to be interesting this week whether we can push a bit lower," said Jane Foley, a strategist with Rabobank in London.
"We're at levels where from a long-term valuation perspective the euro is weak but here we have ECB officials saying they will ease further and the Fed headed the other way."
The euro bottomed out against the dollar at $1.2220 on both Friday and early on Monday and Foley said that reflected strong technical resistance to it going below $1.22. The common currency has fallen about 11 percent so far this year. It last traded up 0.3 percent on the day at $1.2264.
Dealers at other banks said there was interest in buying euros around $1.2220-30 and positioning data also showed both that investors had cut back on bearish "short" bets against the euro and that there was still room for more to do so if they choose to cash in profits before the end of the year.
There is no major data due in Europe this week, but U.S. numbers on Tuesday will fuel the debate over the divergent policy paths being taken on either side of the Atlantic.
Greek Prime Minister Antonis Samaras, whose party is trailing the anti-bailout Syriza Party in opinion polls, may struggle to avoid a snap election in two remaining rounds of voting for his candidate for president, planned on Dec. 23 and Dec. 29.
The concern for markets is that that could lead to a renewed threat of Greece defaulting or even departing from the euro.
"The markets may be quiet for now due to holidays but the Greek vote on Dec. 29 could really shake things up," said a trader at a Japanese bank.
Sterling, also a sufferer against the dollar since July, was up 0.1 percent at $1.5630, but 0.2 percent weaker at 78.48 pence per euro.
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