It seems that we can no longer label those heavily indebted countries of Southern Europe as being the periphery.

The idea that Greece leaving the Eurozone could cause the disintegration of the single currency means that the tail continues to wag the dog and will do for some time to come.

Europe is at last waking up to the idea that were Greece to leave, then the domino effect could be catastrophic. Keeping Greece in the club and funding its needs seems to have been accepted as policy.

Mrs Merkel added to the feeling that a solution is close by saying yesterday that “If Greece one day can rely once again on its own revenue, without having to borrow, then we’ll have to look at this situation and make an evaluation,” Merkel told Bild am Sonntag in an interview when asked about the prospect of debt forgiveness. It wouldn’t happen before 2014 or 2015, “if everything goes according to plan,” the chancellor said.

It remains to be seen just how constitutionally possible such an action would be and we are nowhere near getting ratification from inside the EU or, just as importantly, those outside agencies that are equally as heavily involved.

Those are very much matters for the future but the markets clearly liked what they have seen and have gone heavily into risk on mode with the Euro trading comfortably above 1.30 and looking very much lined up for an assault on the heavy resistance at 1.3120.

This is a heavy data week with the final NFP of the year to be released on Friday preceded by the PMI reports across both Europe and the U.S.

In line with current optimism, the expectation is for European data to show some improvement from very poor figures released last month and for the U.S. to see a slight pullback. Italy was the first to release and they showed a weaker than expected number.

Economic data has taken a back seat over 2012 as risk sentiment and the debt crisis have driven markets. Therefore it will take something spectacular (and PMI data isn’t considered spectacular) for the sentiment to change.

The JPY continues to be weak and trade comfortably above 80.00 and 106.80. It could be that we are seeing the beginnings of sustained weakness for the Japanese currency and that will be a relief for the new Government following the upcoming elections.

It seems that the Euro will be relatively strong into the New Year. The Greek issue has been deferred yet again but the markets don’t seem to mind. This has had a positive knock-on effect on Spain, their bond yields fell again in November and Italy has managed to avoid the limelight.

It remains to be seen if this serenity can be continued into the harsh reality of European winter following the festive season.