Euro Recovers after Finance Minister Meeting, BoJ on Hold, FOMC Awaited

After Eurozone finance ministers meeting, Luxembourg prime minister Juncker said the Greek programs has now been "politically adopted" by the eurogroup. The second bailout of EUR 130b to Greece was signed off and will be formally approved on March 14. IMF is expected to vote on its contribution on March 15. EFSF CEO Regling said that Greece will receive first first payment of EUR 5.9b in March, second EUR 3.3b in April and third EUR 5.3b in May. Greek finance minister Venizelos said the situation for Greece has changed and will have "an effect on the economic life of the country". Venizelos pledged to continue implementation of its austerity program to fulfil the "fundamental obligations".

Spain was also a subject of discussion in the Eurozone finance ministers meeting. Spanish prime minister Rajoy raised the 2012 budget deficit target earlier this month to 5.8% of GDP. Juncker said that target "is dead" as Eurozone finance ministers now requested Spain to achieve 5.3% of GDP deficit target in 2012. That is, 0.5% lower than what Rajoy earlier this month. Nonetheless, that's still a much softer number that the 4.8% figure originally agreed. 2013 deficit target was kept at 3% of GDP. Juncker said that Spain is the fourth- largest economy of the euro zone and as such it cannot take total leave from the promises it has made." And he said the result was a "healthy mix between consolidation and common sense."

BoJ left rates unchanged at 0-0.1% today and keep the asset purchase program and credit-loan program unchanged at JPY 30T and JPY 35T respectively. That's as widely expected. Meanwhile, BoJ added JPY 1T program for US dollar denominated loans and will expand the domestic venture capital style fund by JPY 0.5T.

Much of today's focus is on the FOMC meeting. Speculations of QE3 have reduced markedly after the Chairman's testimony weeks ago. It's widely expected that not much change would be see in the rate guidance and the policy statement. Yet, Bernanke remained concerned about the employment condition in the US. Given the fact that the unemployment rate stayed above 8% in February, further easing is still possible later this year.

On the data front, Japan tertiary industry index dropped -1.7% mom in January. Australia NAB business confidence dropped to 1 in February. UK RICS house price balance improved to -13 in February. DCLG house price and trade balance will be released. Swiss combined PPI and German ZEW will be featured in European session. US retail sales and business inventories will be released before FOMC announcement.