Euro Dipped Against Sterling, But Risk Rebound Limited Dollar And Yen

The forex markets remained generally steady in Asian session today. The euro received some support ahead of near-term support levels against dollar and yen and attempted to recover. But strength has been very weak so far. An indeed, sell-off was seen against sterling. The dollar's rebound was limited by stabilization in the stock markets where the Dow closed slightly higher by 32 pts. That's followed by recovery in Asian indices. Indeed, the greenback is also showing some sign of weakness against the sterling and Canadian dollar. US durable goods orders will be a major focus today but might not provide much inspirations. Markets' mind will stay on the EU summit on Thursday and Friday even though expectation for anything concrete from the summit is low.

Spain reported that the central government deficit reached 3.41% GDP in the first 5 months of the year, compared with the annual target of 3.5% and last year's level of +2.59%. According to Deputy Budget Minister Marta Fernandez Curras, "the deficit has started on a downward path and we expect that to intensify." Yet, he pledged that the government is "determined to meet the budget target". Meanwhile, Italian Prime Minister Mario Monti won the first 2 of 4 confidence votes, calling to pass his labor reform. Tentatively, the reform will be approved on Wednesday if the final 2 votes were passed. The reform has been criticized by both by labor unions and the business establishment.

German Chancellor Merkel continued her strong opposition on eurobonds. EU President Van Rompuy released his grand vision 10 year road map on banking supervision and deposit insurance yesterday with issuance common bond as an idea for medium-term. The report was a collaboration effort with ECB president Draghi, EC President Barroso and head of EU finance ministers Juncker. But in response to that, Merkel bluntly said that she doesn't see "total debt liability as long as I live." Earlier in the week, Merkel said the idea of eurobond was "economically wrong and counterproductive." Meanwhile, Bundesbank president Weidmann criticized that that debt union will not tackle the sources of crisis eurozone but delay necessary reforms.

On the data front, New Zealand trade surplus was slightly wider than expected at NZD 301m in May. UK BBA mortgage approvals and CPI reported sales will be featured in European session. From US, durable goods orders are expected to rise 0.5% in May with ex-transport orders up 0.7%. Pending home sales are expected to rise 1.3% mom in May.