Euro Climbs Higher Amid Meeting Of EU Finance Ministers

The dollar continued to slide as sentiment moved moderately higher amid the EU finance ministers meeting, ongoing discussions regarding a Greek debt deal and ahead the Fed's two-day policy meeting which begins tomorrow. Several officials have expressed their views that Greek PSI talks are progressing and nearing an end – EU's Rehn said that PSI negotiations should be concluded 'shortly', IMF head Lagarde said that she is sure delivery will come on Greek talks, Germany and France's finance ministers noted progress on Greek talks and the Greek finance ministry said that PSI talks have been 'substantive'. While EU leaders are optimistic on a deal being reached soon, Greece noted that the PSI offer is due by Feb. 13.

In other Europe news, the EZ consumer confidence for January unexpectedly rose to -20.6 from the prior -21.3 (cons. -21.4). This helped to lift the common currency which was also supported by declining sovereign yield spreads. News out of the meeting of euro area finance ministers indicated that the group agreed on the European Stability Mechanism (ESM) based on Finland's proposal. EUR traded higher against most of the majors but was slightly lower against the Scandies. EUR/USD rose above the 1.30 psychological big figure and EUR/JPY is currently above the key 100.00 level.

In the U.K., Bank of England's Posen and Tucker spoke with Adam Posen noting that downside risks are 'materially reduced'. He went on to say that the stock of QE, not the pace, is more important for stimulus and that he would voter for additional QE in February if forecasts justify it. Paul Tucker gave fewer hints on his policy stance and said that banks should reduce their reliance on rating agencies. The pound underperformed amid speculation of further easing and ahead of the release of the BoE's MPC minutes and U.K. 4Q GDP report on Wednesday which is expected to show a contraction of -0.1%. GBP/USD was rejected from the 55-day SMA around the 1.56 figure and is currently around 1.5570.

U.S. equities were choppy trading in and out of positive territory and ultimately finished the day mixed. The DJIA closed to the slightly lower by about -0.09% while the S&P 500 climbed to finish marginally higher by about +0.05% to end the session. Commodities were mostly higher on the back of a weaker dollar with the precious metals gold and silver currently higher by about +0.67% and +0.36% respectively. WTI crude is higher by +1.65% and testing the key 100 level. UST yields were mostly higher as the yield curve steepened ahead of the FOMC meeting. 10-year Treasury yields advanced about 4.2bps to nearly 2.07%.

There is relatively light economic data flow due out in the upcoming Asia/Pacific session with only the November Australia Conference Board leading index. Also of note is the IMF economic outlook which will be released tomorrow and IMF head Christine Lagarde noted today, 'we will lower growth forecasts for most parts of the world'.