Euro Mildly Lower Ahead Of EU Finance Ministers Meetings

Asian equities opened the week broadly lower as investors are taking cautious positions ahead of earnings releases, which start with Alcoa tomorrow. Mild risk aversions took major currencies lower against dollar and yen. The World Bank lowered its growth forecast for East Asia and Pacific and noted that "China's slowdown this year has been significant, and some fear it could still accelerate." Also, it warned that "economic projections for EAP (East Asia and Pacific) are surrounded by considerable uncertainties, and a variety of risks continue to loom over the global and regional economy."

Risk from euro was stemmed by recent policy moves but there are still main risk of "financial market disruptions" and US "fiscal cliff". Growth projection on China was revised to 7.7% this year and 8.1% in 2013, down from 8.2% and 8.6% respectively. East Asian growth projection was lowered to 7.2% this year and 7.6% in 2013, down from 7.6% and 8.0% respectively.

EU finance ministers are meeting today in Luxembourg. EU Commissioner for Economic and Monetary Affairs Rehn said that negotiations on Greece's EUR 13.5b austerity targets have "progressed well" and he expected the eurogroup to "give a positive and supportive statement" on such progresses. Rehn noted that it will take some more time for troika's report to finalize.

He also emphasized that it's important Greece's situation is concluded in the coming weeks. Spain will also be a topic of discussion in the meeting. Spain's Deputy Prime Minister Soraya Saenz de Santamaria said last week that they'll need "all the elements on the table and also the certainty that it would materialize" before making a decision on bailout.

Last CFTC data showed that euro net shorts was basically unchanged at 50.3k contracts on October 2. Sterling net longs rose for another week to 30.1k contracts, hitting another 2012 high. Yen longs continue to stay in range is rose slightly to 29.3k.

Australia dollar net long dropped sharply from 63.7k, down from 2012 high of 89.6k in the prior week. Canadian dollar net long also dropped slightly to 101.2k, down from 105.3k. Overall picture supports that major currencies were basically in consolidation with Sterling quietly building up some strength. Meanwhile, the aussie's sharp fall in net longs should be noted, and that's even before RBA's rate cut.