Against all odds, last week saw the appeal of the Euro rejuvenated amid concerns that Portugal could become the latest economic casualty in the Euro-Zone. The Euro began the week at lows not seen since September 2010, however made a convincing rise after an auction of Portuguese government debt was met with healthy demand. Earlier in the week news of Japan's intent to buy-up European debt has temporarily allayed fears of an imminent bailout for Portugal and allowed bond yields to retreat from the highs of over 7 percent levels. We also saw a successful Spanish dept auction which gave investors another reason to throw support behind the ailing currency. A slight shift in language from European Central bank was also enough to keep the Euro on a north-bound trajectory against that of its major counterparts with the President Jean-Claude Trichet raising concerns of inflationary pressures, signalling a willingness to raise interest rates should the need arise.

So for now it appears the Euro has dodged a bullet - however with the cost of servicing debt for indebted nations such as Portugal and Spain remaining considerably high in comparison that of the Euro's flagship economy Germany, one would expect it's only a matter of time before these concerns once again rear their ugly head. Nevertheless, Euro price action recording a near 4 per cent appreciation against the greenback over the week and had a solid week against the Aussie appreciating 4.28 percent.

The appeal of the Aussie dollar was also diminished against the greenback with price action recording a near 1 percent loss against the greenback over the week. From the economic fallout from flood ravaged Queensland, to local economic signposts such as last week's tepid employment data - the perception of an economy which is beginning to show its cracks has taken its toll on the local unit. Assisting the Aussie's decline on Friday was the news China will raise bank capital reserve requirements on the 20th of January. With concerns of further tightening from as they combat inflation pressures; this is always going to have an effect on China-contingent currencies such as the Aussie dollar. It's become clear the strong correlation between US equities and the local unit has somewhat diminished, with the fortunes of the Aussie now more than ever reliant on China and local economic health.

The week ahead will see China once again in the spot light ahead of the release of top tier economic feedback on Thursday. Chinese GDP is expected to fall from 9.6 to 9.4 percent with Consumer prices also expected bear the brunt of recent tightening measures to fall from 5.1 to 4.6 in the month of December. At the time of writing the Aussie dollar is buying 99 US cents and 74 Euro cents.